Brazil

The territory of the Federative Republic of Brazil is subdivided into five regions (south, southeast, central west, northeast, and north) and 26 federal states as well as the federal district with its capital Brasilia. Counting a population of 189.3 million people and a gross domestic product (GDP) of US$1,295 billion (or US$6,841 per capita), Brazil is the world's fifth most populous country, the largest economy in Latin America, and the 10th largest worldwide in 2007.

After several years of double-digit growth rates in the early 1970s, Brazil's economic development strategy based on import substitution came to an end in [Page 183]the early 1980s. It was followed by the “lost decade” and the default on foreign-currency denominated debt in 1987. Years of hyperinflation reached their peak in 1993. Starting in 1994 a successful stabilization program (Plano Real) introduced a new currency, the real (R$), which was initially pegged to the dollar and freely floated from 1999 onward. A milestone was achieved when Brazilian foreign-currency denominated debt became investment grade in 2008.

The Brazilian government has conceded operational autonomy to the Central Bank, which has been able to continue its orthodox and highly transparent macro-economic policy even over the change of government in 2003 from a center right to a center left coalition. Having adopted an inflation target policy, the inflation rate dropped to less than 5 percent in 2006 and 2007. Decreasing foreign debt and rising foreign currency reserves reestablished credibility and permitted the country to become a net creditor in 2008.

Although GDP growth is modest (2003–07 the average was 3.8 percent), it is considerably higher than the long-term (1986–2007) average of 2.7 percent. Increasing domestic demand, one of the key drivers of GDP growth, can be traced back to several factors: (1) nominal interest rates, although the world's highest, fell to 11.5 percent in 2008 after topping 26.5 percent in 2003; together with micro-finance programs, this decrease has fostered lending; (2) higher wages (minimum wage rose to R$415 [US$250] in March 2008), combined with low inflation and currency appreciation have increased purchasing power; (3) a large antipoverty program, bolsa familia (“family fund”), which conditions payments to children's school attendance and vaccination records, reaches one-fourth of the Brazilian population; (4) formal employment has risen by 15 percent between 2003 and 2007; (5) though a highly unequal country, income distribution has improved over the last decade (the Gini coefficient fell from 0.66 in 1996 to 0.56 in 2006).

Traditionally leading in primary products (iron ore, soy beans, meat, coffee), the economy has increasingly diversified. Brazil is today the world's fourth largest commercial aircraft manufacturer (Embraer) and the sixth largest car producer, with an expected output in 2008 of over 3 million cars. General industrial production has increased since President Luiz Inacio Lula da Silva took office in 2003. Energy supply has been increasing and is mainly provided by hydro-, thermal, nuclear, and wind power with 76.4 percent, 21.4 percent, 2.0 percent, and 0.2 percent of total energy production, respectively, in 2008. In 2006 Brazil became self-sufficient in oil and in 2007–08, the oil company Petrobras discovered large offshore reserves raising prospects of becoming a future net oil exporter. Oil production was 1.9 million barrels per day in 2007.

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