Economic Analysis of Brazil

An Economic Analysis of Brazil
Name
Institution
An Economic Analysis of Brazil
Agenda
Brazil is considered as the 8th largest economy based on its nominal gross domestic product (GDP) and purchasing power parity Fouad and Gouvea (2018). To date, the Brazilian economy greatly depends on import substitution to foster growth. The current study seeks to undertake an economic analysis of Brazil by underscoring its history, market systems, the government’s role in the market system, GDP, fiscal policy and monetary policy
Country History
The economy of Brazil has undergone multiple transformations in the last two decades. Fouad and Gouvea (2018) reveal that the country started experiencing a remarkable economic growth (in terms of GDP) in the last quarter of 2004. Prior to this era, Pijining (2018) explains that the per person GDP of this economy shrugged at 0.8% in the period between 1995 and 2002 due to the issues of laxity in the political regime and heightened levels of corruption. However, the post-2003 period saw the country's per person GDP develop at an annual rate of 2.5%; a figure that is about 3 times greater than the levels of growth experienced between 1995 and 2002. Such advancements can be attributed to the moves taken by the preceding political regimes to adopt effective policies aimed at fostering poverty reduction and eradication, heavy investments in infrastructure, adoption of economically viable foreign ties, and institutionalization of cost-effective sources of energy.
Further, the last two decades saw the advancement of new trends in the processes adopted by the country’s administration to foster reductions in the levels of inequality and poverty. According to Dutz (2018), such developments were because of the Brazilian government's move to adopt programs aimed at advancing the levels of its populace's income through the creation of employment opportunities as well as the extension of the political regime’s social expenditures and programs. Fouad and Gouvea (2018) demystify that alongside the increasing levels of expansion of the real minimum wage among most of the members of the populace and the positive developments experienced in the formal industries, the government has played a significant role in increasing the brokering potencies of its workforces. Pijining (2018) demystifies that since the inception of President Lula’s administration in 2003, the underlying levels of poverty in Brazil reduced by over 56%. On the other hand, the researchers explain that the levels of extreme poverty reduced by over 65%; an aspect that lifted over 31 million Brazilians from abject wallowing.
Brazil has experienced massive changes in the ways through which the underlying benefits from economic advancements have been distributed since 2004 in comparison to the previous eras. For instance, Fouad and Gouvea (2018) demystify that in the period between 1993 and 2002, the country was affected with the issue of non-uniform distribution of wealth between the members of the higher and lower social classes. In their research, the scholars reveal that over 50% of the country’s income gains were distributed to only less than 10% of the Brazilian population; an aspect that led to an increase in the number of households that lived in poverty. Pijining (2018) attributes the underlying changes in the number of households living in poverty to the periodic increments in the levels of economic growth. For instance, the government of Brazil initiated the Bolsa Familia system in 2003 with the aim of ensuring that the members of the populace that were considered to be extremely poor had access to investment opportunities. Dutz (2018) reveals that the Bolsa Familia program led to an increase in the country’s GDP by over 0.5%. On the other hand, the number of individuals that benefited from this initiative increased from 16 million in 2003 to over 57 million in 2012 (figure 1). Bresser-Pereira (2018) reveals that after institutionalization and strengthening of Bolsa Famila, the country’s expenditures on social services increased to over 16% of the country’s GDP.
Figure 1: Graphical representation of the number of people registered in Brazil’s Bolsa Familia program expressed as a percentage of the country’s population. Source: Dutz (2018)
Market System
According to Bresser-Pereira (2018), Brazil enjoys the presence of a strengthened free market economy in which the aspects guiding key market processes such as production, distribution, and investment is only controlled by prevailing states of demand and supply. Fouad and Gouvea (2018) describe Brazil as the 9th largest economy across the globe and the 7th fastest growing nation. With a larger geographical area than that of the United States, Brazil enjoys a welcoming home economy and one of the greatest attractions of foreign direct investments in South America. In 2016, Brazil was considered as the 7th best destinations for foreign direct investment with its imports increasing by over 23% to $37 billion and its exports at $26 billion (Pijining, 2018). According to Dutz (2018), the country has established close business ties with key global markets such as the United States and China. Currently, China is considered the largest foreign trading partners with the United States coming second. Further, Dutz (2018) explains that the fact that this economy is still recovering from the effects of the global recession of 2007-2008 explains why the country’s foreign exporters are faced with multiple challenges in their efforts of establishing businesses in this country. On the other hand, foreign direct investments in Brazil are greatly affected by the issues of workers’ strikes, exorbitant fuel prices, and the unstable political environment due to the unpredictable presidential elections. However, the Brazilian market still presents foreign investors with an ample market for doing business in multiple sectors.
In the past ten years, Brazil has made multiple advancements in is market systems with the aim of increasing its direct foreign investment opportunities. For instance, the country signed the Open Skies agreement in May 2018 with the aim of fostering expansions in its futuristic air travel opportunities which are projected to be of great significance in increasing the trade relationships and opportunities with other key global markets such as the United States and China Fouad and Gouvea (2018). On the other hand, Pijining (2018) reveals that Brazil wen to record as the second Latin American economy to embrace the ATA Carnet; an agreement that is meant to enhance the country’s trade relations with the United States by creating a window aimed at allowing free and temporal entry of commodities from the United States. Further, Dutz (2018) demystifies that the government of Brazil adopted the eVisa program with the aim of allowing fore...