MACROECONOMICS

Economic Analysis of Brazil



Economic Analysis of Brazil

Introduction

The global economy continues to grow at a robust pace; expected to expand 4.4% both in 2011, and 2012 supported primarily by emerging economies. However, the threat coming from high-commodity prices (especially oil) increases the uncertainty and introduces a risk to growth and inflation in most regions, even to some of those that might benefit directly from costly commodity export prices. After a slow start in the first years of the 21st century, Brazil experienced strong and sustained economic growth from 2004, until succumbing (albeit briefly) to the global financial crisis towards the end of 2008. This paper explores the economic concern of the South American Country, Brazil in the context of GDP growth and reformation of the industrial sector growth.

Economic Analysis of Brazil

Brazil is among the largest economies and most populous countries in the world, with a gross domestic product (GDP) of US $2,025,000m. Despite being the world's largest coffee exporter in the 19th century, Brazil became one of the region's earliest industrial powers, as coffee profits invested in industrial and commercial enterprises. Market conditions for Brazil this decade is very good: not only has global demand for hydrocarbons and bio-fuel been on the rise, but Brazil has also made progress in global high technology, information technology, software and services markets. With favorable commodity prices during 2004-07, the Brazilian economy grew by an annual average of 4.5%, the fastest rate for 20 years (Euro Monitor, 2011). In the last quarter of 2007, the economy grew by 5.4%, inflation was reduced to below 4.5% and international reserves exceeded US $190,000m (Europa Worldplus, 2011).

The service sector remains the largest component of Brazilian GDP, comprising 66.0% in 2008, followed by the industrial sector with 28.5% and agriculture with 5.5%. Brazil is the world leader in the production of sugar, coffee, orange juice, and tropical fruits for export, the world's second largest soybean producer, and among the top producers of cotton, beef, and poultry for export (Europa Worldplus, 2011). The agribusiness sector (which includes processing and distribution) accounted for 36% of total exports and 25% of the labor force. Brazil has a sophisticated and diverse industrial sector. Production includes automobiles, rail cars and locomotives, aircraft and satellites, iron ore, steel, petrochemicals, and consumer products such as footwear, toys and electronics. Industrial output grew by 8% in 2004, but declined to 2.9% in 2006, before recovering to ...