| Date - Field | Brazil - Economy - overview |
2008 January
Economy - overview | Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. Having weathered 2001-03 financial turmoil, capital inflows are regaining strength and the currency has resumed appreciating. The appreciation has slowed export volume growth, but since 2004, Brazil's growth has yielded increases in employment and real wages. The resilience in the economy stems from commodity-driven current account surpluses, and sound macroeconomic policies that have bolstered international reserves to historically high levels, reduced public debt, and allowed a significant decline in real interest rates. A floating exchange rate, an inflation-targeting regime, and a tight fiscal policy are the three pillars of the economic program. From 2003 to 2007, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains coupled with high commodity prices contributed to the surge in exports. Brazil improved its debt profile in 2006 by shifting its debt burden toward real denominated and domestically held instruments. LULA DA SILVA restated his commitment to fiscal responsibility by maintaining the country's primary surplus during the 2006 election. Following his second inauguration, LULA DA SILVA announced a package of further economic reforms to reduce taxes and increase investment in infrastructure. The government's goal of achieving strong growth while reducing the debt burden is likely to create inflationary pressures. |
2007 January
Economy - overview | Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. From 2001-03 real wages fell and Brazil's economy grew, on average only 2.2% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President LULA DA SILVA. Since 2004, Brazil has enjoyed more robust growth that yielded increases in employment and real wages. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, all reinforced by a series of IMF programs. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment; from 2003 to 2006, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains - particularly in agriculture - also contributed to the surge in exports. While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003 - straining government finances - before falling as a percentage of GDP in 2005. Brazil has improved its debt profile over the past year by shifting its debt burden toward real denominated and domestically held instruments. LULA DA SILVA restated his commitment to fiscal austerity by maintaining the country's primary surplus during the 2006 election and plans to pass a package of further economic reforms upon entering office for his second term. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable. |
2006 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. From 2001-03 real wages fell and Brazil's economy grew, on average, only 2.2% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President LULA DA SILVA. In 2004, Brazil enjoyed more robust growth that yielded increases in employment and real wages. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, all reinforced by a series of IMF programs. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment: in 2003 and 2004, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains - particularly in agriculture - also contributed to the surge in exports, and Brazil in 2004 surpassed the previous year's record export level and again posted a current account surplus. While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003 - straining government finances - before falling as a percentage of GDP in 2004, while Brazil's foreign debt (a mix of private and public debt) is large in relation to Brazil's small (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable. |
2005 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. From 2001-03 real wages fell and Brazil's economy grew, on average, only 2.2% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President LULA DA SILVA. In 2004, Brazil enjoyed more robust growth that yielded increases in employment and real wages. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, all reinforced by a series of IMF programs. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment: in 2003 and 2004, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains - particularly in agriculture - also contributed to the surge in exports, and Brazil in 2004 surpassed the previous year's record export level and again posted a current account surplus. While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003 - straining government finances - before falling as a percentage of GDP in 2004, while Brazil's foreign debt (a mix of private and public debt) is large in relation to Brazil's small (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable. |
2004 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. From 2001-03 real wages fell and Brazil's economy grew, on average, only 1.1% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President Lula DA SILVA. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, which have been reinforced by a series of IMF programs. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment: in 2003, Brazil ran a record trade surplus and recorded the first current account surplus since 1992. While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003, straining government finances, while Brazil's foreign debt (a mix of private and public debt) is large in relation to Brazil's modest (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable. |
2003 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998, and the country posted moderate GDP growth. Economic growth slowed considerably in 2001-02 - to less than 2% - because of a slowdown in major markets and the hiking of interest rates by the Central Bank to combat inflationary pressures. New president DA SILVA, who took office 1 January 2003, has given priority to reforming the complex tax code, trimming the overblown civil service pension system, and continuing the fight against inflation. |
2002 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998, and the country posted moderate GDP growth. Economic growth slowed considerably in 2001 - to less than 2% - because of a slowdown in major markets and the hiking of interest rates by the Central Bank to combat inflationary pressures. Investor confidence was strong at yearend 2001, in part because of the strong recovery in the trade balance. |
2001 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. In the late eighties and early nineties, high inflation hindered economic activity and investment. "The Real Plan", instituted in the spring of 1994, sought to break inflationary expectations by pegging the real to the US dollar. Inflation was brought down to single digit annual figures, but not fast enough to avoid substantial real exchange rate appreciation during the transition phase of the "Real Plan". This appreciation meant that Brazilian goods were now more expensive relative to goods from other countries, which contributed to large current account deficits. However, no shortage of foreign currency ensued because of the financial community's renewed interest in Brazilian markets as inflation rates stabilized and the debt crisis of the eighties faded from memory. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998. Brazil's debt to GDP ratio for 1999 beat the IMF target and helped reassure investors that Brazil will maintain tight fiscal and monetary policy even with a floating currency. The economy continued to recover in 2000, with inflation remaining in the single digits and expected growth for 2001 of 4.5%. Foreign direct investment set a record of more than $30 billion in 2000. |
2000 January
Economy - overview | Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. In the late eighties and early nineties, high inflation hindered economic activity and investment. The Real Plan, instituted in the spring of 1994, sought to break inflationary expectations by pegging the real to the US dollar. Inflation was brought down to single digit annual figures, but not fast enough to avoid substantial real exchange rate appreciation during the transition phase of the Real Plan. This appreciation meant that Brazilian goods were now more expensive relative to goods from other countries, which contributed to large current account deficits. However, no shortage of foreign currency ensued because of the financial community's renewed interest in Brazilian markets as inflation rates stabilized and the debt crisis of the eighties faded from memory. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998. Brazil's debt to GDP ratio of 48% for 1999 beat the IMF target and helped reassure investors that Brazil will maintain tight fiscal and monetary policy even with a floating currency. The economy is expected to push growth up to 3% in 2000. |
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This page was last updated on 19 August, 2008 |
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