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Presented By: Group-2 Aaushi Sangai-11HR-002 Anirudh Lanka-11DM-061 Megha Madan-11DM-071 Sachin Pal-11FN-085 Sahil Gandhi-11FN-086 Sumeet-11DM162
Economy
GDP (nominal): $2.5 Trillion GDP (PPP): $2.3 Trillion Annual GDP growth: 3.5% Contribution to GDP: Primary Sector 6% Secondary Sector 28% Tertiary Sector 66% Trade Balance: $20 Billion surplus
To understand the macroeconomic policies and study their implication on the Brazilian economy in light of the various internal as well external factors.
GDP
The GDP growth (annual %) in Brazil was last reported at 7.49 in 2010. Major Sectors contributing to GDP 1. Agriculture 2. Manufacturing 3. Services
MONETARY POLICY
Brazil has opted to use interest rates as an instrument to control inflation This method of using interest rates is known as an inflation-targeting regime Cost of Capital is incredibly high as compared to International Standards The amount banks charge on their loans even for very good rated companies is well above what is charged worldwide
MONETARY POLICY
To increase GDP by increasing money supply in the market(printing currency)-led to HyperInflation Implemented a reform policy known as Real Plan or Plano Real
Contd
Request of Funds from IMF The funds were used Government Expenditures on Health,Education,Housing The Fiscal Responsibility Act
Debt
In 1994-98, Brazil's domestic debt grew very rapidly while remaining short in maturity Brazil's domestic debt has posed two challenges to policymakers: it has grown very fast and, despite progress, remains extremely short in maturity. The main explanations: extremely high interest payments (caused by Brazil's weak fiscal stance and quasi-fixed exchange rate regime) and the accumulation of assets (especially obligations of Brazil's states).
Regulatory Environment(Cont.)
Impacts tax and labor rules. Tremendous effect on business and corporate relationships. Strength of legal rights index reported at 3.00 in 2010.( 0=weak to 10=strong )
Improvement:
Turning more public hospitals over to nonprofit bodies. Allocate around 12 percent of its GDP to health care
Facts:
Health care spending as a share of GDP: 8%. Share of health care spending that is privately funded: 60% Life expectancy at birth: 72.5 years Infant Mortality Rate: 21.17 deaths per 1000 live births Number of beds per 1,000 (global average): 2.4 (4.3) Nurses per 1,000 (global average): 29.1 (60.3) Physicians per 10,000 (global average): 16.9 (23.4)
Defense sector:
End of military rule in 1985 Secrecy surrounding the funding of various military-related projects. Among the countries with the lowest levels of military expenditures implies few external threats. Largest military power in Latin America. Military expenditure: is around 6% of govt. expenditure. As a % of GDP it is noted 1.94% in 2009.
Infrastructure:
Roads are the primary method of transportation in Brazil of both passengers and freight. Highway system is inadequate and poorly maintained. The railway system in Brazil is very limited. Brazil's air transportation is well developed with 48 main airports, 21 of which are international.
Education Sector
Literacy rate of 97.5% for people age 6 to 14 Literacy rate of 84.1% for people age 15 to 17 Literacy rate of 92.0% Govt. is spending around 5% of their GDP in education sector and it is 16% of their total expenditure.
Initiatives:
A program that has created about 700,000 scholarships. opened more than 180 vocational schools . allocating 18% of the countries total budget to education.
Imports:
2000 55.8
2002 57.7
2003 46.2
2004 48.25
2005 61
2006 78.02
2007 91.4
2008 173.1
2009 127.7
2010 187.7
Imports contd.
Imports barriers before 1990. Imports of goods and services (annual % growth) in Brazil was reported at 18.49 in 2008 Fuel imports (% of merchandise imports) in Brazil was reported at 19.82 in 2008 which was more than 50% in 1980. Manufacturing (% of merchandise imports) in Brazil was reported at 70.22 in 2008 .
Exports:
Country Brazil
1999 46.9
2000 55.1
2002 57.8
2003 59.4
2004 73.28
2005 95
2006 115.1
2007 137.5
2008 197.9
2009 153
2010 199.7
Exports contd.
In 2005, Brazil's total exports more than doubled to US$118 billion from $58 billion for 2001 trade surplus has expanded more than 16times to $47 billion from $2.6 billion over the past 4 years. world's leading exporter of sugar, coffee, beef and orange juice and soybeans.
Exports contd.
Factors That May Increase Exports: Brazil is using only 1/3 of potential arable land. The potential for expansion is three times this amount. Rising incomes around the world contribute as well. Factors That May Decrease Exports: Important markets in the North America Free Trade Agreement and in East Asia are blocked. The Future of Brazils Exports: Brazils efforts to improve sanitary conditions will determine the future increases in meat exports. Increasing demand for raw materials for bio fuels. Domestic food consumption is also rising. This could reduce exportable surpluses. Considerable growth in import spending and fast growth in Asia, which together will further deteriorate the trade surplus.
FDI:
The Foreign Capital and Exchange Department (Decec) of the Brazilian Central Bank (Bacen) is responsible for foreign direct investment (FDI) in Brazil.
FDI contd.
Started in 19 century, British direct investments. Improved in 20 century, due to urbanization and industrialization. Last few decades, attracted especially by the large domestic market but also by government policies . FDI jumped four times since 2005 totalling 661bn. Telecomm sector created boom in 1998-2001.
International Linkages
Active participant in the multilateral systems of rules regulating the action of national states in the economic, trade and political fields . Traditionally a leader in the inter-American community Charter member of the United Nations In 2009 became a creditor country to the International Monetary Fund (IMF). Brazil was a leader of the G-20 group of nations
Ties with US
Close relations with US for 200 years Jointly Cooperate on trade issues, HIV/AIDS efforts, regional concerns, and the international peacekeeping operation in Haiti Brazil and the United States signed an agreement to promote and increase the worldwide trade in ethanol as both are the top global ethanol producers Brazil and the United States cooperated in principle on the creation of a Free Trade Area of the Americas (FTAA)
TOTAL
$24.1 billion
Plano Real
Instituted in the 1994, sought to break inflationary expectations by pegging the real to the U.S. Dollar Brazil floated the Real (BRL),breaking with decades of exchange rate manipulation and repression by the government Inflation was brought down , but not fast enough to avoid substantial real exchange rate appreciation during the transition. The Appreciation meant that Brazilian goods were now more expensive relative to goods from other countries, which contributed to large current account deficits
Political Stability
The National Congress of Brazil is the legislative body of Brazil's federal government The 1988 constitution grants broad powers to the federal government, made up of executive, legislative, and judicial branches The president holds office for 4 years, with the right to re-election for an additional 4-year term, and appoints the cabinet.
Fifteen political parties are represented in Congress. Party-switching is a long-running theme in Brazilian party politics, So ,the proportion of congressional seats held by particular parties changes regularly. President LuizIncio Lula da Silva ( who took office on January 1, 2003) has been credited with implementing policies that promoted upward social mobility by addressing inequality and raising living standards. The country dramatically reduced the jobless rate from a historic high of more than 13 percent that year to 6.7 percent in September 2010
Brazil is struggling with an image of corruption that is aggravated by frequent scandals involving high-level politicians and bureaucrats
The government wants more control over resources and has very little desire to allow the international community to profit from the exploitation of the country's vast new oil frontier
The political economy that has evolved since 1994 across two two-term presidential administrations has made it possible for Brazil to re-position itself in the global arena An overvalued currency is hurting Brazilian exports and pushing up domestic prices. A Big Mac now costs around $6.16 (1.5$ in 2003 ) compared to 4.07$ of US
The government wants more control over resources and has very little desire to allow the international community to profit from the exploitation of the country's vast oil frontier
Rate of Unemployment
Causes
Firstly, the period of higher economy growth for Brazil was also a highly dynamic for the whole world. So as the world saw huge growth in GDP (especially BRIC nations), even Brazil grew. (Exports/investments grew) Secondly, since late 2007 the world economy has been on decline due to the financial crisis brought about by the US subprime market (mortgages). This crisis only hit the Brazilian labor market in the second half of 2008.
Government initiatives
Unemployment insurance Public Employment Service Training programs Microcredit programs Cash transfer programs
Poverty
Brazil is one of the most unequal nations in the world, although it is one of the wealthiest. According to the United Nations Development Program (UNDP), income are as high as those of some very poor African countries such as Sierra Leone, or Namibia. However, the World Bank ranks the Brazilian economy among the 10 richest in the world, with a Gross Domestic Product (GDP) of $1.7 trillion PPP, equal to the Italian GDP. Per capita GDP is in the order of $ 9,000 PPP.
Government initiatives
Plano Brasil Sem Misria (Brazil Without Poverty) Bola Familia ( monthly cash transfers) Brazil Without Misery ( monthly cash transfers to rural poor) New policies and programs have been introduced to make land available to poor landless people National Program for Strengthening Family Farming