Economic trends

Brazil is the 10th largest economic power in the world with a GDP of nearly 800 billion dollars in 2006. President Lula’s prudent fiscal and monetary policies, coupled with necessary microeconomic reforms have restored confidence in this market. However a strict fiscal discipline and restrictive budgetary policies will not allow the government to pursue an ambitious reform agenda and thus will restrain growth. GDP growth rate was 3.7% in 2006 and 4.4% in 2007, with a forecast of 4.0% for 2008 (according to the IMF). Brazil has made progress but significant vulnerabilities remain. The Brazilian government’s debt (largely domestic) remains high, at 50% of GDP. Total foreign debt, while falling, is still large in relation to Brazil’s modest export base. The inflation rate has decrease from 6.9% in 2005 to 3.6% in 2007.

Main branches of industry

Brazil has abundant natural resources and its economy is relatively diversified. Brazil is a huge agricultural power: it is the world’s largest producer of coffee, sugarcane and oranges; this attracts numerous international food processing groups. Agriculture accounts for 10% of GDP (30% when including agri-businesses) and 40% of Brazilian exports. Brazil has the world’s largest commercial cattle herd (50% larger than the U.S.). Forests cover half of Brazil, with the largest rain forest in the world located in the Amazon Basin. Being a big industrial country, Brazil benefits from its abundant mineral resources: it is the 2nd largest exporter of iron in the world and one of the main aluminum producers. The country is now increasingly standing out in sectors like textile, aircraft, pharmaceuticals, cars, steel and chemicals. Most of the big automobile manufactures have established their production facilities in Brazil. The industrial sector contributes nearly 37% to the GDP, while as the service sector contributes around 52%.

International trade

Privatization (right from 1996) has triggered the inflow of investments into the country. The share of foreign trade in GDP reached 26% in 2006. The depreciation of the Real has stimulated Brazilian exports. Brazil’s top three import partners are: the U.S.A., Argentina, and Germany. The country mainly imports mineral fuels & oils, machinery and electrical & electronic equipment. The top three export partners are: the U.S.A., Argentina and China. The country mainly exports vehicles, machinery, iron & steel, ores, meat and other food products.