Brazil's Economy Essay

3758 words - 16 pages

Brazil’s Economy

In 2001, Brazil was viewed as one of the up and coming, fastest growing economies in the world. In fact, Jim O’Neill wrote a paper titled, “Building Better Global Economic BRICs”, which is about the emerging economies in the world. The acronym BRIC represents: Brazil, Russia, India, and China (Smith). These global leaders have lived up to expectations and have grown at a much faster rate than the rest of the world. They have been able to lift millions of people out of poverty, including 40 million in Brazil alone.
Will Brazil continue to be part of the BRIC in years to come? A 2010 Goldman Sachs report predicted by the year 2030 the BRIC countries would account ...view middle of the document...

This uproar even includes other Brazilian politicians, whom are now making the necessary economic reform much more difficult. These protectionists believe the cheap products they have been purchasing from China and Mexico make it impossible for Brazilian companies to compete in their market. They also believe that due to the very loose monetary policies in Europe and the United States the Brazilian companies are at a huge disadvantage. The loose monetary policies were even enough for President Rousseff to meet with President Obama to discuss the issues (Llosa). The protectionists have already pushed for a minimum of 100 new tariffs. These “necessary” tariffs could last as long as 12 months, affect the areas of steel, petrochemicals, pharmaceuticals, and capital goods. The government said, “The duty hikes were needed to ease price differentials caused by the ever weakening global economic outlook” (Rapoza). They believe the tariffs will help boost domestic manufacturing, which is considered to be one of their economy’s weaknesses.
The protectionism has come under fire from many different places. Particularly from the British Prime Minister, David Cameron, who said, “To try to isolate and protect industry from competition may benefit the local industry, but it has long-term costs and will block the development of a truly competitive and innovative industrial base” (Guerrero). He warned the Brazilian people and the government that the protectionist policies could potentially backfire. Unlike Brazil, the UK is actually ridding themselves of their trade barriers. They are also cutting taxes on partnerships and providing tax breaks to new businesses, along with providing more work visas. They are making all of these changes to encourage talented international workers to relocate to the UK. Cameron said by making all these necessary changes it will proved “more jobs, growth, and prosperity” (Guerrero). As we see Brazil is heading in the exact opposite direction. President Rousseff said that these tariffs are a “legitimate trade defense” against developed countries. She said this after there was an official complaint from the United States government and allegations from the European Union members (Guerrero).
It is predicted that inflation will reach 5.5% while GDP growth forecasts will be a mere 1.5%, which is down from 4% originally. Despite Brazil’s Central Bank’s attempts to keep inflation down it will eventually be uncontainable. The domestic prices will rise due to the significant drop in competition due to the tariffs. This will in turn make the amount of household debt levels among the lower and middle class citizens, which is already at record levels, increase (Fisch).
Theses trade policies have also further damaged the already weakened regional trade among Brazil’s neighboring nations. The Argentinian government began the trade restrictions which broke the South American free trade block. Now Brazil is following...

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