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Brazilian Economy - Essay Example

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Brazilian Economy

These factors combine to show that Brazil is on its way up. Those who maintain that Brazil is performing the most of the BRIC group also argue that despite huge withdrawals by foreign investors, Brazil has suffered less than the other BRIC members and this is a good sign of a healthy economy.
Delfeld (2008) says, "BRIC begins with Brazil. Political stability (Mr. Lula is up there in the stratosphere at a 78% approval rating), strong consumer spending, more flexible exchange rates, a more effective central bank and higher reserves may help Brazil weather the global financial storm much better than most expect. Brazil has been able to maintain foreign reserves in excess of $200bn. More than that, the credit crisis may have come at a good time, potentially helping the economy to cool without damping growth too far below the country's potential. Inflation has risen recently to about 6% due to strong consumer spending. A slowing of global growth could be helpful in moderating this and also allow the central bank to suspend its tightening policy sometime later this year."
Brazil has been doing exceptionally well since the election of President Luiz Lula in 2006. With exports booming, the country has witnessed considerable growth in the size of its middle class. Not only that, Brazil has its millionaire's club expanding too with 130,000 members in 2006 to 190,000 in 2007. That is extraordinary economic growth and it is because of this that Brazil was awarded "investment grade" status by Standard and Poor's which also attracted considerable investor energy and helped boost their confidence.1

A country that now poses a threat to the US economy has seen all this exceptional growth in only the last two years. Before this period, the company was far behind the US and even other strong economies like Japan. The GDP comparison in 2005 is shown below:

Gross Domestic Product in 2005 (Trillions USD, Current Prices)

US 12.46, Japan 4.56, Germany 2.79, UK 2.20
France 2.13, China 1.98, India 0.80, Brazil 0.80 2

At that time United States was clearly the leader but a lot changed this year when world's biggest economy was dealt some serious blows. Brazil however continued to show growth signs till as late as October 2008 but beginning November, Brazil has also faced some growth problems. The recession that has hit the world has also arrived in Brazil. According to the very recent survey by Morgan Stanley, Brazilian economy is expected to grow by 2 percent in 2009; this is clear down from the earlier prediction of 3 percent. Apart from this, Morgan Stanley also doesn't rule out the possibility of zero growth. Brazilian currency is also consistently falling against US dollar.

The only reasons why we must not rule out possible economic problems in the future is Brazil's continued fight against drug lords and its unequal income distribution. Brazil's poor continue to suffer as its rich section is consistently getting higher share of economic growth. Lula has certainly been successful in creating a robust economy but what he is overlooking is the fact that there is vast disparity between the rich and the poor which not only translates into fewer opportunities for the poor but also leads to higher drug-related activities. The Gini co-efficient is a useful tool for measuring income distributio ...Show more

Summary

The emerging markets in the world can pose a serious threat to the United States economy which is already suffering from recession. One of these threats would most definitely come from Brazil, the world tenth largest economy based on exchange rate. Brazil formally became a confirmed power player when in it joined BRIC with other strong economies of the world…
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Brazilian Economy essay example
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