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Brazil is the largest country in South America, with a population of over 214 million, making it the fifth largest in terms of area and the sixth largest in terms of population in the world. Brazil has a diverse landscape, and its lush forested areas are famous, including the Amazon rainforest in the north, which is the largest in the world, with the country possessing about 60% of the Amazon. However, in recent years, these forests are gradually shrinking. According to data from the Brazilian National Institute of Space Research, as of two months before 2022, the area of deforestation in the Amazon region had reached 430 square kilometers, more than double the average level of the past decade.
In addition to supporting its GDP through industries such as rubber and timber, Brazil is also the world’s largest exporter of beef and soybeans. This dependence on exports has led to illegal deforestation and even suspected intentional ignition of wildfires to create more pastures and farms.
Like other South American countries, Brazil was colonized by other countries until its independence in 1822. The only difference is that its colonial power was the Portuguese Empire, while most other South American regions were colonized by Spain. From independence until 1985, the country underwent several centuries of populist and military government rule, before adopting a constitution in 1988 and defining itself as a democratic federal republic. Following this, Brazil benefited from the transfer of industrial activities to low-cost countries in the 1990s, and also attracted engineers and technical personnel with technical skills. With foreign investment, better education, and increased domestic consumption, Brazil became an important participant in the global economy, and was seen as one of the world’s fastest-growing emerging markets and a contributor to global growth.
Such strong growth saw Brazil, along with Russia, India, China, and South Africa, referred to as the BRICS, which are emerging economies with extremely fast economic growth, and by 2050 it was expected to surpass developed economies. However, the economic performance of the past decade showed that Brazil no longer belongs to the BRICS. The country, once one of the fastest-growing economies in the world, has been in a state of severe decline due to long-term corruption, political turmoil, and poor management. Just in 2015 and 2016, this led to a contraction in GDP of nearly 7%.
With the global inflation rate rising, Brazil, which is export-oriented with commodities, has seen an improvement in its economic outlook due to the rise in prices of agricultural products and raw materials. At the same time, as an oil-exporting country, it has benefited from the continuously rising prices of oil and energy, leading to a new high in exports, and foreign investment is expected to increase. However, this is not entirely good news, as families’ actual incomes will be eroded by rising inflation, and although the central bank has increased the interest rate from 2.0% in 2020 to 11.75% to curb inflation, it is very likely that the central bank will further raise interest rates in the future, which means that Brazil may once again face the challenge of entering a contraction, and even growth may freeze in 2023.
The recent investigations into the insurrection by extremist supporters of former president Jair Bolsonaro presents challenges for the new president Luiz Inácio Lula da Silva as he begins his term. The Economic Intelligence Unit (EIU) predicts that Lula will form a broad coalition in congress for support, but he will face strong opposition from right-wing parties. Lula’s policies are expected to be more fiscally expansionary and less market-oriented compared to Bolsonaro’s policies. Reforms to sales taxes and the income tax code will be a priority in the first year. The aim to increase social spending will result in a new fiscal framework, leading to a public debt/GDP ratio above 85% by 2026.
GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.
The global economy is slowing down, particularly in the US and Europe, and Brazil’s real GDP growth is expected to decelerate from an estimated 2.8% in 2022 to 1% (IMF) in 2023 due to global slowdown, elevated domestic interest rates, and high inflation. The negative effect on growth will be partially offset by a modest recovery in private investment once election-related uncertainty eases. However, if the Lula government’s interventionist policies weaken the business environment more than expected, growth will come in below forecast.
Agriculture and mining exports are expected to rise with a post-pandemic recovery in global demand, while manufacturing has already rebounded due to stimulus for consumers and a weaker currency. Services will grow more modestly following consumption trends. If the Lula administration restores confidence in the fiscal framework, which is the assumption made by many institutions, growth is expected to rise to an average of 1.7-2% annually in 2024-2027.
GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.
n recent years, Brazil, as one of the emerging economies, has emerged on the international stage and formed a new group called the BRICS countries. One of the most notable common characteristics of these countries is that their populations are younger than those of developed countries, especially in Europe, North America and Japan.
However, despite being later than other countries, Brazil is also undergoing a demographic transition and its population growth rate is slowing down. From the 1950s to the present, Brazil’s fertility rate has been declining, with a total fertility rate (TFP) slightly higher than 6 per woman at the time, but by 2018, the number had fallen to 1.75 per woman, not only lower than the 2.1 replacement rate, but even lower than that of the advanced country, the United States. In addition, it is estimated that by 2039, the number of elderly people in Brazil will exceed that of children, resulting in a rising death rate and social problems such as aging population.
With the modernization of agriculture, the transformation of agricultural technology has forced agricultural workers to leave the countryside for the city. Around 2000, the rural population declined for the first time, while the urban population continued to grow rapidly, 87% of the population living in urban areas, 6% living in slums, and the urban population growing at a rate of 1.1% per year. However, the rapid influx of population into cities has also led to a series of problems in Brazil.
With the increase in urban density in Brazil, unless public infrastructure projects keep pace, the quality and level of life in these cities will decline, as cities have no time or resources to accommodate and employ people. Once a large-scale accident or natural disaster occurs, transportation infrastructure will be under greater stress. As a result, many slums have emerged in Brazil’s cities, and the people in these areas are suffering from underdeveloped and below-standard living standards.
For example, in Rio de Janeiro alone, about one fifth of the six million residents live in hundreds of slums. All these slums have many health and safety issues. Many slums, located on steep slopes, cannot support structurally safe housing, so many slums are far from stores, schools, and transportation routes. In addition, due to poor hygiene and water shortages, slums are easily prone to outbreaks of disease.
White 47.7%, mixed 43.1%, Black 7.6%, Asian 1.1%, Indigenous 0.4% (2010 est. by CIA)
Portuguese (official and most widely spoken language)
Roman Catholic 64.6%, other Catholic 0.4%, Protestant 22.2% (includes Adventist 6.5%, Assembly of God 2.0%, Christian Congregation of Brazil 1.2%, Universal Kingdom of God 1.0%, other Protestant 11.5%), other Christian 0.7%, Spiritist 2.2%, other 1.4%, none 8%, unspecified 0.4% (2010 est. by CIA)
In 1988, Brazil adopted a new constitution after over two decades of military rule. The government of Fernando Henrique Cardoso (1995-2002) brought an end to hyperinflation and implemented reforms to liberalize the economy. During the presidency of Luiz Inácio Lula da Silva (2003-10), Brazil saw the benefits of these reforms and experienced a consumer-driven boom fueled by commodities. However, this ended and led to unrest due to a weak economy, corruption, and inadequate public services. Lula’s successor, Dilma Rousseff, won a second term in 2014 but was impeached in 2016 for budget irregularities. Her vice president, Michel Temer, completed her term. Jair Bolsonaro won the 2018 election, but lost to Lula in the 2022 second-round run-off election, and Lula took office as president on January 1st, 2023.
Brazil’s political system consists of a president who carries out policies approved by the Chamber of Deputies, the lower house, and the Senate, the upper house. The judiciary conducts constitutional review and has independence. The president can use temporary decrees to pass legislation, but the constitution provides Congress with ample power to check the executive. The lower house has representation from 30 political parties and has a history of weak party discipline.
The benefits and entitlements established under the 1988 constitution have resulted in a doubling of central government primary spending to over 27% of GDP. In 2016, Congress passed a federal spending cap and in 2019, a robust pension reform was passed. The central bank, Banco Central do Brasil, started a rapid normalization cycle in March, raising the policy rate to its current 13.75%. The government reduced emergency coronavirus spending to less than 1% of GDP in 2022, but fiscal consolidation is progressing slowly. The public debt to GDP ratio was 76.8% in October 2022 and the fiscal deficit was 4.2% of GDP.
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