Doing business in Brazil: economic snapshot April 2018

ECONOMIC SNAPSHOT
BRAZIL

Internal perspective

The largest and most populous country in South America, Brazil is coming out of a deep economic recession. Pressing problems include high income inequality, inflation and rising umployment, and the economy is constrained by fiscal imbalances and political corruption. Still, it’s a valuable, sophisticated market with a strong ability to adapt to both foreign and domstic business..

Population

208,385,000 (2017)

Internet users

119 million (2016)

Gross domestic product (GDP)

  • $1.796 trillion

Top 5 Imports

Top 5 exports

Languages

Top 3 Trading Partners

Top franchises

GDP growth rate (est.)

  • 0.263% in 2017
  • 1.794% in 2018

Trends and outlooks

  • Entering a recovery after hitting rock bottom
  • Industrial production recorded the fastest growth in more than two years
  • Government is reforming pensions, which is crucial for restoring government finances

Economic challenges

  • Very high inflation with low GDP growth
  • Few new investments
  • Strict limitations on hiring and firing employees

Introduction

According to 2017 data from the International Monetary Fund, Brazil is the eighth-largest economy in the world based on both nominal gross domestic product (GDP), which evaluates market prices, and purchasing power parity (PPP), which compares the prices of like consumer goods among countries.

With a population of some 208 million, Brazil is the largest economy in South America. It’s the second-largest economy in the Americas after the US.

What should I know about nominal GDP and PPP?

Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.

Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one denomination. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.

PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.

Economic indicators

Brazil’s official currency is the Brazilian real, abbreviated as BRL or R$. The Brazilian real to US dollar tends historically fluctuates from R$3.103 to R$3.310, depending on the overall economy.

Services account for much of the country’s GDP at 67%, followed by industry and agriculture. Banking, finance and insurance services are particularly robust, as is the manufacturing sector.

The country has extensive mineral resources, and the agribusiness sector has grown considerably since the 1950s, although the environment has suffered as a result, particularly in the Amazon.

Brazil is one of the world’s largest producers of hydroelectric power, allowing it to produce its own energy without relying on oil in the late 2000s. The country imported up to 70% of its oil requirements prior to this period.

Enjoys a trade surplus with other countries, Brazil’s exports in 2017 totaled some $218 billion with imports at $151 billion. Agribusiness and mining are major contributors to Brazil’s trade balance with other countries.

Brazil comprises around 100 million workers. As of January 2018, unemployment rate is a high 11.8%. Income inequality also remains high, with many workers earning only the minimum wage.

Major contributors to the economy

Brazil is a member of the World Trade Organization and several other trading groups. The EU, China, the US, Argentina and South Korea are among its top trading partners.

Brazil’s top exports include oil seed, ores, slag and ash, meat, computers and other machinery and mineral fuels, including oil. Its major imports include computers and other machinery, electrical machinery and equipment, mineral fuels and oil, motor vehicles and organic chemicals.

The 2017 Forbes Global 2000 ranking of the world’s largest companies included 20 companies from Brazil.

Economic prospects

Brazil was one of the fastest-growing economies in the first decade of the 21st century, an era of economic and social progress that reduced poverty in the country by the millions. However, in 2015 and 2016, Brazil fell into its worst recession in history in the face of growing political disenchantment, weak commodity prices, lower tax revenues, credit restrictions and rising interest rates.

The government’s designed recent economic reforms to boost foreign investment and reduce government spending. By the first quarter of 2017, the economy began growing again, officially lifting the country out of the recession. Unemployment and economic uncertainty remain high, though, and only time will tell if the economy can sustain recent gains.

Sources:
  1. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_
  2. https://en.wikipedia.org/wiki/Economy_of_Brazil
  3. https://www.forbes.com/global2000/list/#country:Brazil
  4. http://www.worldbank.org/en/country/brazil
  5. https://en.wikipedia.org/wiki/2015%E2%80%932018
    _Brazilian_economic_crisis

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