[Use Times New Roman 12 point. I fixed it for you.} Aiko, Soya, Matsuo 1
The Economy of Brazil
HidemiAiko
1506213
Takumi Soya
1506256
Yumi Matsuo
1506301
SokaUniversity
Faculty of Economics
International Program
Economics Lecture B Advanced B
Raymond Yasuda
January 17th
[The title of the paper should come here.]
Introduction[You need not give the introduction a heading because it is assumed that the first part of a paper is the introduction.]
Recently many countries such as Southeast Asian countries and South America have developed greatly. For all of them, especially Brazil,is one of the high growing countries is remarked in the world. The country is included in BRICs, which is composed of Brazil, Russia, India, China, and the Republic of South Africa. The members of BRICs are expected to lead the world economy in the very near future. Thus, Brazil is a significant country in today’s world economy.
Presently, Brazil is designated located as an emerging nation. Its GDP ranking is 9th in the world in 2015, and top amongin South American countries(Global note, n,d). The Brazil’s ranking was 11th in 2005, and 7th in 2010, so Brazil has maintained its keep high economic activity during the past 15 years. Per capital GDP ranking is 73th in the world in 2015. Although GDP ranking is high, the per capital GDP ranking is low because of low education standards and poor institutions. According to the Global Competitiveness Index [This citation in not in your reference list.], Brazil ranks 99 out of 138 countries for institution’s ranking is health and primary education is 99th in 138 countries. Regarding institutions,One of the reasons why institutionthe ranking is low is that the Brazilian government is swing [What does this mean?]. When a new president is elected, there is a lot of struggles for power are occurred. [How does this result in low ranking of its instituions?] In addition, it is well knownand it is famous that many of its assembly members engage in corruption. These government decomposition[What does this mean?] connect low level of institution.
Figure 1. [The period comes after the number.] Figure.1 Brazil: A global player facing new challenges. (2014). Retrieved from
Figure1 shows the percentage of primary, secondary, and tertiary industries in Brazil. [Explain what are primary, secondary and tertiary industries.] According to the other major of GDP [What sources is this?], in 2012, Brazil was is strong in tertiary industries, and it means that Brazil’s economy is well developed well. Compared with its GDP in 1995 [Do you mean 1985?], the chart illustrates the tremendous growth of Brazil's explained service industry industry’s great growth.
Brazil trades in an under open market. [Explain what this means.] Its main trade partners areis China, the US, and Argentina.Its main exporting goods are primary goods such as iron ore and oil about 48.7%(Ministry of foreign affairs of Japan, 2016) [This citation is not in your reference list.]. Its main import goods are law[What are law materials? Are they materials for lawyers and judges or for students in the law department of its universities?] materials about 45.0%.
[You need to give an overview of the main sections of this paper.]
Background Information
[You need an introductory paragraph here.]
Geography
Brazil is the largest country in South America and is the fifth largest nation in the world. Brazil covers almost half of the South America continent and it is bordered to the north, west and south by all the South American countries except Chile and Ecuador. Its area is about 8,520,000sqkm and Brazil is 23 times larger than that of Japan. Its landscape is very varied. Brazil is most known for its dense forests, including the Amazon, the world’s largest jungle, in the south. But there are also dry grasslands, rugged hills, pine forests, and a long coastal plain. Northern Brazil is dominated by the Amazon River and the jungles that surround it. It total length stretches 4250 miles, making it the longest river on Earth. Southeastern Brazil was once completely covered with dense forest but now, it is the country’s industrial capital, home to Brazil’s biggest cities. In addition, Brazil’s climate is tropical and subtropical climate. The Brazilian winter lasts for only three months and the temperatures varies within the year with monthly averages in winter between 13 and 18 degrees Celsius. During the summer, temperature can reach 30 to 40 degrees Celsius but accompanied by frequent showers and a rather heavy humidly. In short, Brazil’s land is very huge and there are a lot of characteristic nature. Also, the Brazil is humid climate in all year land.
Demographics
Brazil’s total population is 208million. It has the largest population in the South America and is the fifth in the world. Brazil’s population growth rate is 0.86%, it is 0.35 lower than the world median. The proportion of males to females is about 49.2% to 50.8%. The Brazil’s percentage of the population by age group is 0-14 years is 22.8%, 16-24uears is 16.43%, 25-54 years is 43.84%, 55-64 years is 8.89% and 65 years and over is 8.06%. There are five ethnic groups in Brazil, each proportion is white is 47.7%, mulatto(mixed white and black) is 43.1%, black is 7.6% and Asian is 1.1%. Also, official and most widely spoken language is Portuguese and less common language include Spanish, German, Italian, English, In addition, Religions is Roman Catholic 64.6%, Protestant 22.2%. Moreover, Brazil is high immigration because Brazil has a net migration of 15,924 people immigrating into the country as of 2015. It is ranked 55th in the world wide rank. In addition, the literacy which means the people who at the age 15 and over can read and write is about 92.6%. In summarize, Brazil’s population is large and its grouth rate is low. Also, the proportion of male is a little bigger than the male. The Brazil’s percentage of the population is 25-54 years is the biggest. Likewise, population is composed most of white and mulatto, Brazil’s major language is portuguese, and catholic is the most popular religion. In addition, there are a lot of migration and most of Brazilian people can read and write.
Brazil Economy
Brazil prosperous in oil market. The output of iron ore is biggest as same as Australia in the world. Brazil can also yield oil which is the second strongest in the South America. In 2007, the country found new oilfield called pre-salt. By the discovery, Brazil became more powerful in oil market. Today, Brazil’s strongest main trade partner is China. After that the US and Argentina follow. Main exporting goods are iron ore, soybeans, and crude Petroleum. The other side, main importing goods are refined petroleum, crude petroleum, and petroleum gas.
Brazil’s human capital index is 64.51 and world ranking is 84 in 130 countries in 2016. The index is decreasing from previous year. However, literacy rate has expand every year and the rate was recorded 91.48 in 2013. Literacy rate related with human capital and Brazil’s high economic growth is supported by the capital.
Brief Economic History
Today, Brazil is most attractive economic country in the world because of high economic growth. However, the nation faced many hardships such as independence from Portugal, the failure of economic policy and hyperinflation. Although it seems harder when it is compared with other countries, Brazil could made base of economy by getting over the difficulties.
Strong exporter. Brazil was controlled by Portugal form the 1700s until 1822. The country was blessed with cereals and resources, so it had many large plantations and mines which used black slaves. Especially, sugar and gold were exported a lot and contributed Brazil’s economy. The output of gold occupied 85% in the world. Portugal import the cotton fabric from the UK by using the Brazil’s gold. After independence in 1822, coffee caught on in the world, so instead of gold, coffee became one of the famous exporting goods in Brazil. From 1850, Brazil exported the largest amount of coffee in the world. However the country imported more industrial goods from Europe than it exported in the form of cereals and natural resources. Thus, the country often used to face a lack of foreign currency, and it could not pay for its imports.
High economic growth. From the 1950s, the government has administered the policy of import substituting industrialization because although exporting was enough, the nation has relayed on importing industrial products. Concretely, the Brazilian government amplified domestic manufacturing companies and government enterprises, and it invited a lot of foreign companies.These kind of companies contributed to the growth of Brazil’s economy. In addition, the government imposed customs duty against foreign goods to protect domestic industries. As a result, the country achieved remarkable development called “Brazil miracle” from the late 1960s to 1973. In 1960s, the component of GDP, primary industry was 17.8% and secondly industry was 32.2%, but in 1970, although primary industry decreased to 11.8%, the secondly industry expand to 35.8%. The average of economic growth was 7.7% during the 1970s (Suzuki, 2008).
Oil shock and foreign credit. However, the security of raw materials became difficult because of the oil shocks in 1973 and 1979. The country had imported a lot of raw material and intermediate goods, especially coal in order to produce manufactured products. In that time, Brazil’s self-sufficiency rate of coal was only 10 %, so the oil crisis hit the Brazilian economy. Furthermore, it had borrowed much money from foreign countries and companies in order to be industrialization. Thus, the government faced to monetary problem that could not return the defts.
Democratization. Democratizationin Brazil was deeply related to Brazil economy. The economy was impacted by democratization. The dictatorship was lost in 1985, and Brazil’s policy started changing from military to democracy. The military dictatorship had ruled Brazil since 1964. Because the new government tried to cut spending, the inflation occurred and it became out of control. Then, the policy for that inflation was based on wage and price freezes, and deposit freezes. This policy protected inflation at once, but the price began to rise again. These policies were all failed attempts. After that inflation peaked in 1990. Then, the government decided to change closed economy into open economy.
The Plano Real. The important event for Brazil economy was “the Plano Real”, which was the turning point of its economy. The Plano Real was launched in 1994 by Henrique Cardoso. The new currency was introduced, and it made income cheap. The five points in implementing the Plano Real are (1) clearing the public deficit, (2) stopping the indexing of the economy, (3) indexing the economy according to the exchange rate, (4) opening the economy by reducing import tariffs, and (5) increasing sharply international reserves. Then, Brazil could make large scale trade. Thanks to this plan Brazil could exterminate the hyperinflation with inflation falling.
In 2002, the election of Lula da Silva. Lula da Silva was elected as the 35th president of Brazil in 2002. He was a member of the Workers Party, so people predicted his new policy would be radical and he was very critical for Plano Real. Foreign investor looked careful at this. However, he maintained the Plano Real. Then the Brazil economy continued to be stable.
One country ofBRICs. BRICs is a group of the four countries, Brazil, Russia, India, and China, whose economic growth will be higher in the world economy through the 21st century. Brazil is a prime producer of iron ore, sugar, coffee, meat, and other commodities. Brazil has huge amount of material such as natural resource and agriculture, and its economic growth rate is high even after world financial crisis. Many economists predict Brazil has high poetical to growing economy. The GDP growth rate changed -0.9% in 2009 to 7.5% in 2010.
In summary, the brief history of Brazil economy has six main periods. In the 16th and 17th, Brazil was strong for the exports. Then, it economy has begun to rapid expansion from 1950. However, Oil shock and foreign credit damaged its economy from 1973, and Brazil face the monetary problems. The turning point of economy was democratization, the political change in 1985, and changing into open economy. From 1994, the Plano Real that is government policy to solve the hyperinflation at that time was enforced. The president was changed in 2002. Today, higher growth economy of Brazil is predicted because Brazil called one country of BRICs.
The Economy of Brazil
Part 1: Economic Indicators
Introduction
Today, Brazil’s high economic growth is remarked remarkable, and it is a member of BRICs. However, the economy has fluctuated greatly because of by many causes ofmany events and system changes. The part 1 will show every indicator’s overall trend and denote which cause influenced the indicators: a)GDP, b)unemployment, c)inflation, d)interest rate, f)government public finance, g)exchange rate, and f)balance of trade. [This should be double spaced.]
Gross Domestic Product (GDP) by Soya
Figure 2 1-a. Nominal (current US$) and Real (constant US$ in 2010) GDP. From “The World Bank” 2016. Retrieved on October 3, 2016 from
Figure1-a 2 shows the Nominal and Real GDP of Brazil from 1960 to 2015. GDP (Gross Domestic Product) indicates the total economic value of final goods and services which is produced in a year. Nominal GDP indicates the total economic value in one year by using the price of that year. On the other hand, Real GDP indicates only the output in one year with using the base year price. It eliminates the influence of inflation. In the calculation for real GDP in 2010, the current US$ rate was used, so both types of GDP intersected in 2010. Both of the trends of nominal GDP and real GDP kept increasing between 1960 and 1980. From 1981 to 2013, the real GDP increased constantly. The nominal GDP was also increased from 1981 to 2013, but it was rapidly down in 1992, 1999, and 2002. Before 2010, the nominal GDP was below the real GDP, and this meant that the price level was higher in 2010 than in previous years. The higher price was caused by strong inflation in Brazil.
Nominal GDP rose rapidly from 2002, and it exhibited a steeper increasing. Inflation had keptincreasing since 2002, and the price level caught up to the GDP in 2010. From 2013 to 2015, nominal GDP declined, and the price level went going down, which we call deflation.
Real GDP shows constant increase between 1960 and 2013. This means that the quantity of output of Brazil kept increasing, and the economy was expanding. However, from 2013, real GDP has been declining because the economy is contracting.
Figure 3 1-b. GDP growth rate (annual %). From “The World Bank” 2016. Retrieved on October 3, 2016 from
Figure 1-b3 shows the real GDP growth rate of Brazil from 1960 to 2015. The GDP growth rate indicates the change in the real GDP (base is 2010US$) from the previous year and its positive or negative indicates growth or contraction of GDP. The graph shows Brazil's economy expanding and contracting as it fluctuated between -4.39 % and 13.98 % during this period. The fluctuation trend is less volatile from 1994 than in years prior to 1994, and the growth rate is positive from 1994 to 2013 except 2008. From 2012 until now, the GDP growth rate has been contracting.
There are two main trends in the GDP growth rate. One is from a higher growth rate in the 1960s and 70s, and the other is the beginning of a shrinking growth ratefrom 1980. Firstly, the economy continued to produce a high growth between 1964 and 1972. Household consumption was approximately between 67 % and 72 % of GDP during the1960s with consumption continuing to rise constantly (World Bank, 2016). From 1965, other parts of GDP started to grow, especially investment. Capital investment's percent of GDP was rapidly rising changing from 16.9% in1968 to 26.8 % in 1976 (The global economy, 2016). The large scale of capital investment in infrastructure and industry helped to establish new industries more and more. For instance, the development of new facility of trading which was in Paranáriver made more inflow of capital and materials, and the domestic industries became higher. People called this situation “Brazil miracle.”Rising investment impacted higher economic growth in the latter half of the 1960s and in the 1970s. The turning point was the lowest point in 1980. In 1980, Brazil experienced its lowest growth rate at minus – 4.39 %, and the economy was contracting because of failed policies and high inflation at that time, Secondly, from 1980, the growth rate improved peaking at 7.95 in 1984 and 1985 but plummeted to–3.10 % in 1989. This drastic drop was connected to the failure of the policy for stabilization from 1986 to 1989. This period is explained in more detail in Part 2 of this paper.
Unemployment by Soya
Figure 4 2. Unemployment rate (total % of labor force). From “OECD” 2016. Retrieved on October 14, 2016 from
Figure 24 shows the unemployment rate of Brazil from 1981 to 2014. The unemployment rate shows the number of unemployed people as a percentage of the labor force. People include in the unemployment rate are people who have no job, who are looking for a job, and who are ready to work immediately if a job is available. In general, unemployment is a lagging indicator of economy. The rate changes little after economic change, expansion or contraction. The reason why it is lagging is that firms do not change the number of their employees immediately to adjust to a volatile economy. Labor cost in firms is difficult to adjust immediately to match companies’ economic conditions.Unemployment has fluctuated between14.11 % in 1981 and 4.85 % in 2014.