Sep 12, 2019 in History
History and Background of Brazil

Brazil is situated in South America and is the largest country washed by the Atlantic Ocean. It borders a range of countries, such as Venezuela, Uruguay, Suriname, Peru, Paraguay, Guyana, French Guiana, Colombia, Bolivia, and Argentina. Brazil is a federal republic with the president at the head of government. The economic system of Brazil determines the free prices for goods and services, which is considered to be a market economy.

Conditionally, the process of development of the Brazilian economy can be divided into several cycles. Each cycle relates to a certain kind of wares that greatly influenced the economy of that particular period. Thus, at the beginning of colonization, the manufacturing and transmitting of timber were implemented. In the 16th and 17th centuries, sugarcane wares were in great demand. This industry was established in northeast Brazil. However, the sugar had little effect on the local economy. Since the Portuguese enterprises were serious competitors in the development of sugarcane, the prosperity of the sugar industry did not affect the economy much. Then, gold, silver, diamonds, and emeralds became extremely popular in the 18th century. The greatest gold booms are remembered to be in 1698, 1719 and 1725. Recently, the gold was founded at Serra Pelada. Actually, it was not prosperous for the local economy because the gold rushes were extremely remote. Eventually, the coffee industry began its growth in the 19th century. It was centered in São Paulo. Until the last quarter of the l9th century, manufacturing was implemented due to the exploitation of slave labor (Watkins). Simultaneously, agricultural and cattle products were widely consumed by local people. Though during World War I Brazil experienced a light flash of industrialization, the country reached a level of modern economic performance only in the 1930s.

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In the 1940s, steel plants began to appear starting with Rio de Janeiro. The industrialization, which lasted from 1950 to 1970, greatly contributed to the development of such industries as steel, petrochemicals, and automobile. Furthermore, it initiated large infrastructure projects. Long-time after World War II, Brazil had 7.4 percent of annual Gross National Product (GNP). Until 1974, such a rate of growth was considered to be one of the highest in the world. Similar to many other Latin American countries, Brazil absorbed excessive liquidity from the American, European and Japanese banks during the 1970s. Thus, the infrastructure was filled with great inflow of funds and areas of private investment were built on state enterprise, even though they were not attractive. Consequently, from 1970 to 1980, Brazil's Gross Domestic Product (GDP) raised by 8.5 percent annually, though the global oil crisis of the 1970s had a negative influence on it. The income per one person increased four times during these ten years and in 1980 it amounted to US$ 2,200.

However, at the beginning of the 1980s, increased American interest rates destroyed the prevailing favorable conditions of foreign indebtedness of international capital markets. It forced Brazil to restrict economic regulations that caused a decrease in the growth of the abovementioned rates. The end of funds inflow did not give Brazil the opportunity for investments. Debts negatively influenced national finances and promoted inflation. In the second half of the 1980s, the monetary system underwent a set of strict adjustments that regulated wages and contracts in accordance with inflation and an increase in prices. By the end of the 1980s, Brazil's overall economic output started to grow, providing necessary trade balance to pay the debts. On the one hand, the crisis of the 1980s prevented the exhaustion of Brazil's policy and developed the Brazilian industry since it forbade import of certain products. On the other hand, it negatively impacted the development of the national economy.

At the beginning of l990's, Brazil performed a set of effective economic reforms. Thus, they accomplished trade privatization, deregulation, liberalization, and promotion of foreign investment by establishing a legal and structural framework. In the 1990s, economic reforms continued and were aimed at reduction of trade barriers and subsidies on services and consumption, as well as at outlawry of state monopolies. In 1994, the Brazilian government implemented the successful Real Plan, which was directed at stabilization. That plan replaced the used currency with the new one, Brazilian Real, and successfully decreased prices and that led to the end of Brazil’s chronic inflation. The Real Plan contributed to the balance of prices and improved income distribution. The value of the currency returned, and the economic growth increased the level of consumption in the lower layers of the population and sufficiently reduced poverty.

Generally, Brazil is one of the largest economically developed countries in the world. It has well-developed manufacturing, mining, agricultural and service sectors. However, there is great inequality of wealth and land in the country. The main trading products of Brazil are bananas, tobacco, cotton, cocoa, sugarcane, corn, rice, wheat, soybeans, citrus fruit, and coffee. Furthermore, Brazil is a major exporter of pigs, sheep, cattle, and poultry. In addition, Brazil’s soil is rich in oil, gas and numerous minerals, such as manganese, iron, tin, platinum, bauxite, uranium, gold, nickel, etc. Moreover, Brazil is famous for producing aircraft, chemicals, steel, motor vehicles, machinery, textiles, shoes, and food. Mostly, Brazil has trade relations with the United States, Argentina, China, and Germany.

At the present time, Brazil is in line with the world’s largest economies, showing significant economic growth. Furthermore, Brazil has become the leading country of South America due to its abundant natural resources. Gradually increasing the level of its various services and developing mining, agriculture, and manufacturing, Brazil’s economy has acquired a strong position in the global economy. From 2001 to 2003, the GDP of Brazil raised only by 2.2% annually because of falling of real wages. Numerous global and internal economic crises hit the country. Nevertheless, Brazil’s economy did not break due to its strength and efficient economic policies and programs. Brazil's economy has been gradually growing and developing since 2004, which caused a rise in real wages and employment. At that time, the main points of the economic system of Brazil included changing the exchange rate, compressed fiscal policy, and policy, which is aimed at preventing inflation. From 2003 to 2006, there was a significant adjustment to the current account of Brazil, which was caused by the sharp depreciation in the currency. Trade surpluses appeared as a consequence. Thus, agricultural surplus negatively impacted the growth of exports. In addition, Brazil’s economy had some disadvantages, which were primarily related to debts. From 1994 to 2003, the number of local debts raised, but Brazil managed to successfully control them by 2006. The president implemented a few economic reforms, which were targeted at regulating taxes and increasing public investment. The current GDP of Brazil is $1.6 trillion, while the real growth rate of GDP is 3.7%. In addition, the unemployment rate has decreased by 9.6% and inflation by 3%.

 

In conclusion, the history of Brazilian economics is rather long and full of significant events and it can be divided into several cycles. Brazil is a highly-developed country in South America and one of the leading countries in the world when it comes to economic development. It has numerous industries, which products are spread all over the world. Though in past Brazil has undergone several crises, at the present time, its economy has a firm ground and tends to steadily continue its development.

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