Why Brazil is not The Economic Super Power that is supposed to be ?!

Brazil has an export-oriented economy, and last year their products brought in over $220 billion. China is Brazil's primary client. With a population of 210 million people, a wealth of natural resources, and the world’s ninth-largest economy in nominal GDP terms, Brazil has always been a land of great potential. But years of political turmoil and stagnant productivity have held the country back as Brazil enters a period of economic reforms. Some of Brazil’s key economic strengths include a vast market, a diversified economy with a historically solid industrial base – perhaps less so in recent years – a strong agricultural sector, and robust domestic demand. Brazil is an exciting country for those who like to innovate and who wish to bring something new to the table. It’s characterized by its flexibility and its openness to contributions and new ideas. Brazil’s most significant challenges today are education and productivity. Something that people may not be aware of is that between 1930 and 1980, Brazil recorded more growth than any other country. More than Japan, more than Europe during its reconstruction period and even more than China at the beginning of the 1980s. But in the last 30 to 40 years, although Brazil is a large economy, it experienced a period of weak growth and stagnant productivity. So Brazil’s most significant challenges today are education and productivity. Therefore, it’s an exciting time for Brazil because they are entering a period of reforms that could transform the dynamics that have dominated the economy over the past 30 years. One of Brazil’s main challenges today is that it has 13 million unemployed people, and worse, many more in a situation of underemployment and job insecurity. If you look at the broader metrics that include part-time employment, people who’d like to work full-time but aren’t able to, we get to a figure of almost 27 million people, which is about 25% of the economically active population. So it’s an extremely dramatic situation from a social perspective. But there is yet another challenge in that it’s not easy for Brazil to embark on a policy of fiscal stimulus in the current climate; because Brazil has a sizeable budgetary imbalance and a significant deficit. Recently Brazil's politicians have voted to raise the retirement age by nine years in a bid to boost a sluggish economy. Politicians from across the divide agreed to finally overhaul the pension system after years of trying to do so. The decision is expected to save the state almost $200 billion over ten years. Welcome to The Atlantis Report. Liberalizations, privatizations, deregulation - Jair Bolsonaro, the new Brazilian president; Also called The Brazilian Trump, or the Trump of the Tropics; Has promised pro-business policies. Done in the right way – not creating private monopolies, not deregulating the environmental sector and with pro-competition policies, for example - it could render Brazil’s economy more modern and competitive. Done in the wrong way, the policies could increase inequalities in the country or further damage the environment. Today more than one year ago, the far-right came to power in Brazil with the election of Jair Bolsonaro as president. Since then, the former army captain, who is openly nostalgic for Brazil’s dictatorship, has made plenty of headlines. With his free-market economy minister, he has promised to turn the country upside down and rid it of corruption. But it seems quite unlikely that Brazil will ever go back to the good days of robust 3.5% growth. Brazil’s economy is export-dependent and relies primarily on exports of commodities to other countries. China’s opening up in 1979 only really ramped up significantly in the 2000s. This pushed demand for commodities through the roof, which drove up prices significantly and greatly aided Brazil’s economic growth. 2008 came around, and the whole myth of Brazilian resilience came when China used a stimulus package to keep the growth rate up, which led to massive infrastructure investments that drove demand for commodities through the roof. In 2014 the commodity bubble burst. China had already started to ween itself off of infrastructure-led growth, which has heavily reduced the demand for commodities. This caused the price for commodities to drop significantly, and as a result, Brazil recorded extremely weak economic growth in 2014. As a result, Brazil was caught off guard (like BRICS partner Russia). The “socialist” government of Brazil, actually paradoxically quite open with its fiscal policy and would more aptly be called a business-friendly government with subsidies attached, didn’t use the huge torrent of foreign investment to do any diversification. As demand for commodities collapsed, Brazil’s economy suffered hugely as it is simply completely reliant on commodity exports, growth has always been reliant on commodity prices without any real changes in underlying productivity growth. It also needs a lot more diversification than just running off of commodities. This needs to change if Brazil is to become more than just another middle-income trapped export-reliant economy. The good n old days are over. It’s extremely unlikely for the demand and price to increase to the levels when China was growing at rates of 8 percent or more unless another country the size of China industrialized with the same speed and vigor China did. The only other candidate on that scale would be India, but it’s incredibly unlikely that India will be able to pull it off. So Brazil cannot wait for the next “boom” to happen to diversify, it will be painful, but it is needed in the long run. Brazil's economy is the world's ninth-largest economy by nominal GDP and eighth-largest by purchasing power parity. The Brazilian economy is characterized by a mixed economy that relies on import substitution to achieve economic growth. Brazil has an estimated US$21.8 trillion worth of natural resources, which includes vast amounts of gold, uranium, iron, and timber. As of late 2010, Brazil's economy is the largest in Latin America and the second largest in the Americas. From 2000 to 2012, Brazil was one of the fastest-growing major economies in the world, with an average annual GDP growth rate of over 5%, with its economy in 2012 surpassing that of the United Kingdom, temporarily making Brazil the world's sixth-largest economy. However, Brazil's economic growth decelerated in 2013, and the country entered a recession in 2014. In 2017, however, the economy started to recover, with a 1% GDP growth in the first quarter. In the second quarter, the economy grew 0.3% compared to the same period of the previous year, officially exiting the recession. Brazil's economy has a gross domestic product (GDP) of US$1.868 trillion nominal, according to the International Monetary Fund (IMF), being ranked as the 9th largest economy in the world. It is the second largest in the American continent, only behind the United States' economy. Brazil is the 73rd country in the world in the ranking of GDP per capita, with a value of US$8,967 per inhabitant. Massive corruption and massively inflated public spending. The public investment for the 2014 world cup and the 2016 Olympics greatly increased hiring, generating greatly increased demand without proper supply to meet that demand. The central bank was completely removed of its de fact independent status up to pre-2008 bust times. So the industrial base to supply the construction goods for those projects delivered, but the industrial and agricultural base to make extra food and other basic goods for all of those now with cash to spend didn’t ramp up. This was aggravated by droughts. The Dilma administration decided to force a substantial drop in electricity prices right before that drought, which caused electricity power to be hiked just six months after the drop (most electricity generation and long-distance transmission in Brazil is government-owned, and electricity prices controlled by the government). When inflation from all of the extra corruption, extra demand hit, the Brazilian government hesitated to raise interest rates and refused to do any non-monetary measures to reduce demand. So we end up with the inverse of the USA problem post-2008. While the US dropped its interest rate to near zero to stimulate demand, as soon as congress became republican, they refused any public infrastructure spending. In Brazil, even with high-interest sky rates, the government was spending too much, forcing the central bank to raise rates even higher, cause demand didn’t cool down. Until Dilma president was impeached, investor and consumer confidence were very low due to newly publicly uncovered massive corruption. Corruption on Petrobras was so high, a single actor in the scandal had to return over US$ 300 million, and we’re sure he did steal more, that’s just what could be proven. Once Dilma stepped down, a new ministry, new BC (Central Bank) President, de facto BC independence restored, we just got to the point where inflation actually cooled, and now the criticism is that BC didn’t lower rates fast enough (just 2 0.25% raise cuts). With the inflation now apparently under control, we might have a few 0.75% cuts, which could finally stimulate growth again. The real difference between Dilma and Temer administration is competence. Given a chance, corruption would still be very high, but now the Brazilian people are coming to grips just how much corruption has been rampant here. This is still affecting consumer confidence. Since Brazil is a big government state, there will be several pains to restore public investment in the economy without corruption. Not only President but also Speaker of the House lost their terms. The President of the Federal Senate has a dozen judicial inquiries weighing on him, and now the public is demanding he gets actually prosecuted for those. In the last month, a single of those inquiries became an indictment. He’s now formally forbidden from assuming the presidency (VP spot is vacant) if the president travels. Its a mess. Its what would happen if the American people actually understood what Trump is doing even before he becomes president. He claims to be of Trump Enterprises management, but he already asked for favors from the Argentine and Japanese executive leaders, even before taking office. But imagine if the President and his secretaries skimmed US$ 100 billion in graft from the federal administration! Bolsonaro has a Herculean task to improve the Brazilian economy with a large population. He could start with the corruption, drugs. Then maybe find an investor to invest in his country by making it attractive by anyway. Instead of pay raise, some experts recommend let the employer give some stocks or dividend so that the rise in the price of a commodity is not passed to consumers. Such that both employee and employer share the gain and pain in their earnings such that it might goad the employees to better performance. Give Bolsanaro a chance good people of Brazil. This Was The Atlantis Report. 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