The challenges and response to globalisation in Brazil.|
1.1 History of Brazil3
1.2 Population, Inflation and Growth rates4
1.2.1 Figure 1 Brazil GDP Growth Rate4
2. 0 Globalisation5
3. 0 Brazil’s economic drivers6
4.0 Opportunities and threats8
4. 1 Opportunities8
4.3 Responses and recommendations8
1.1 History of Brazil
Brazil is said to have been discovered by Portuguese navigators during the 15th Century, and was claimed by Pedro Cabral in 1500 during which was maintained as a Portuguese colony until 1815 where it became united with Portugal. Brazil later gained independence from Portugal during 1822 where it became the Brazilian Empire and has been a republic since 1889. Brazil is the only Portuguese-speaking country in South America and also the largest of the South American Latin countries, occupying almost certainly half of the South American continent. The land itself covers a vast majority of land, approximately 8.5 million sq km, resulting in the 5th largest country in the world, with the climate mainly tropical as it crosses the equator. The north and also central portions of Brazil are occupied mainly by the rain forests of the Amazon River. The current Brazilian president is Luiz Inάcio Lula da Silva of the Workers Party who was elected president in 2002. His successful election was vastly influenced by the intention to end poverty for millions of struggling Brazilians by creating jobs and therefore income and mainly decreasing Brazil’s possible vulnerability to any external crisis. After a successful first term, which reflected his election intentions, he was later re-elected in 2006. Although deforestation is still an issue in Brazilian culture, after it was reported by the Brazilian government in 2005 that 1 fifth of the Amazon had been destroyed, however since then severe efforts have been met in order to ensure the protection of the Brazilian environment that is the Amazon. Laws to stop illegal logging have been put in place and also certification of land ownership has been improved. Some of the main exported goods are iron ore, coffee, sugarcane, and oranges.
1.2 Population, Inflation and Growth rates
The Brazilian population is was estimated in 2008 to be approximately 194.2 million, making it the most populated country in South America and the 5th the most populated country in the world. 1.2.1 Figure 1 Brazil GDP Growth Rate
Brazil has the 8th world GDP making it an industrial power and economic giant. Figure 1 above shows how Brazil is slowly but steadily recovering from the recent recession which had a huge impact on the rate of GDP, at its worst declining by approximately 9%. The overcoming of the recession may be due to the increase in global demand for the products and services which Brazil manufactures and exports. The current inflation rate for Brazil is 5.70% after necessary interest rate cuts in order to reduce inflation in the price of goods.
2. 0 Globalisation
The term globalisation refers to the process by which the interactions of countries of the world develop throughout the global economy. The developments and advances which are made through communication, transportation and infrastructure have a huge impact on the technological, cultural and political exchanges made. Subsequently, globalisation has had a great deal of importance in many countries and businesses throughout the world with a magnitude on the United Kingdom which became primarily the first economic superpower in the world. The connectivity and independence of the worlds markets are essentially improved by globalisation; as a result this method is being used increasingly throughout the past decades by many businesses and markets resulting in the process as a whole steadily improving and also becoming less costly. Globalisation has a dramatic effect on the world’s economy and the population, it also allows the world to communicate, share and exchange culture. Products and services can presently be transported on a global scale traded around the world in as little time as hours and days. The factors which are the main influencers of globalisation are communication, transportation, lowered barriers for foreign investment, political change and globalisation of production. Opportunities are opened when economies work together creating a healthy active market for consumers with a variation of products and services at competitive prices also lowering the prices of manufacture for developing countries.
3. 0 Brazil’s economic drivers
Primarily, a main economic driver of the Brazilian economy is its effortless access to natural resources. A main advantage of the Brazilian culture is the location and perfect climate for many natural resources to successfully be produced such as coffee beans, sugarcane, rice, corn, oranges and wheat. The ease of access to the growth of these natural resources has enabled Brazil to become somewhat of an agricultural superpower. “With millions of people literally hungering for affordable food, Brazil's breakthroughs in tropical agriculture may prove to be the key to feeding a growing global population. If Saudi Arabia fills the world's gas stations, China assembles its consumer goods, and India vies to staff its office services, then it is Brazil that is stepping forward to stock its pantries. The rise of Brazil as an agricultural powerhouse may be the most important story of globalisation that many Americans have never heard of.” (usnews.com, 2008) The above quote has been taken from a US news report and highlights the success of the Brazilian agricultural superpower. Brazil have almost filled a gap in the market and become the main competitor in what could be described as being a world food shortage. A main advantage which overpowers Brazil is the vast amount of land available perfect for agriculture. As the 5th largest country in the world and stretching over 350 million hectares of land, surprisingly only 80 million are currently in use allowing space for future development and expansion. Secondly, the development of “pre-salt” oilfields is another resource which is aiding Brazil as a key driver. “Brazil stopped selling concessions in the offshore pre-salt area, which oil industry executives say will rival the North Sea in size and importance, soon after its discovery in 2007.” (ft.com, 2009) There is a vast advantage which the discovery of the offshore pre-salt area has on Brazil. This is apparent as not only is Brazil the 5th largest country in the world but having access and ownership to the scarce resource can result in an attraction for foreign investment which helps to improve the infrastructure by entering a new market which they were unable to compete in previously. Thirdly, the asset which is the Amazon Rainforest is a simply unique factor to the Brazilian culture. Although as stated previously, one fifth of the rainforest had been noted to have been destroyed, it is clear that the Brazilian government are aware of the concern of global warming. Global warming has recently become highlighted throughout the world and the importance for severe actions to be taken in order to put an end to the destruction of the world is vastly educated. Brazil subsequently has the opportunity of housing the world’s largest rainforest and has the chance to remove the “rainforest destroying” stereotype which has been labelled to Brazil due to the previous use of the rainforest for the attainment of various natural resources which resulted in many natural habitats and animals being destroyed. However, Brazil now has the chance to revolve the negative image into a positive one and therefore creating a main economic driver. Efforts are beginning to be made such as the introduction of laws and anti-deforestation laws. Brazil now has the ability to manipulate the global opinions to be seen as a rainforest friendly country with a positive attitude.
4.0 Opportunities and threats
4. 1 Opportunities
An opportunity which could be suggested for Brazil is to use one of its greatest natural resources, its land. Brazil owns over 270 million hectares of unused land with a potential for agricultural use. This unused land holds incredible potential for future developments. This opportunity provides a potential resource for the poorer Brazilians to take advantage. The creation of farms provides new jobs for poorer Brazilians which will then be given the chance to obtain new skills resulting in future continuous employment consequently helping to tackle and reduce poverty. The recent development of oil farms create opportunity for Brazil to become a main competitor in a global market, expanding their economy without fearing changing oil prices and entering an always competitive and fast moving market. 4.2 Threats
A main threat to Brazil at this particular moment in time is the recession and the potential effects the recession could have on the Brazilian economy. Although it is fair to say that Brazil has almost certainly been one of the first and few countries to emerge from the effects of the recession, the side effects of the recession could still have an impact on the economy. If Brazil is one of the first and few countries to actually escape the recession, the rest of the world may not be so fortunate and this could have a huge threat on the rate of growth which Brazil may hope to now achieve. For instance, the countries which are still in the recession will have a low demand for the products which Brazil may have to offer and the volume to which they are producing, which in turn will have a negative effect unemployment levels and high job loss. 4.3 Responses and recommendations
Firstly in terms of the current problems surrounding the recession and the backfiring effect it may have, Brazil has already managed to survive what can be seen as the hardest part. The concern of lowering oil levels throughout the world put Brazil in a competitive position as there are immense amounts of untouched oil. Consequently, a recommendation would be to invest further into the oil industry as this is a market which is unlikely to be badly affected by the recession ensuring a durable financial situation for the future and an established main competitor especially as the world oil levels run low. A recommendation in accordance with the natural resources and land production, Brazil should continue to farm the natural resources such as sugarcane, coffee beans, oranges and so on, but perhaps priced them more competitively for the short term until the recession has overcome itself as therefore demand may not be entirely lost from the global markets which once would have had a higher interest in importing Brazilian produce. A second recommendation to the aspect of the land is to continue to expand into the excess 270 million hectares of land which are currently unused. The expansion and creating of jobs and furthermore educating the poor through the training of necessary skills for the subsequent jobs at this point in time while the world’s economy is recovering from a recession will be beneficial to Brazil. As a result, the Brazilian unemployment rates will be lowered and production high with high quality produce available during an upcoming boom.
In conclusion, globalisation presents various challenges to Brazil some of which are beneficial and some of which are not. A definite advantage of globalisation is the ability for Brazil to export its natural resources and products on a global scale which in return develops the country financially and economically , for example by creating jobs and through this educating poorer Brazilians who without the need to supply to such a large market would not be needed to work. The expansion and good use of land would not be possible without globalisation as the resulting products would not be as highly demanded.
Source: http://www.property-investing.org/Brazil-economy-forecast.html It is clear from figure that the economic forecast for Brazil over the next 3 years shows an improvement in GDP growth and a clear recovery from the recession, resulting in Brazil on its way to the return of the 2006 positive figures. Brazil is a country with a clear strong backbone and after surviving the recession; it is not only predicted but is guaranteed to develop further and more positively with the tool of globalisation influencing the use of the many natural resources at its disposal and the vast amounts of oil merging Brazil into an ever more powerful and successful country.