With a gross domestic product of $1.87 trillion, Brazil is the world’s ninth-largest economy and the largest economy in Latin America. Until 2012, Brazil had been one of the world’s fastest-growing economies. However, Brazil's economy has since been weighed down by multiple issues, which resulted in a declining growth rate. In fact, Brazil entered recession in 2014 before beginning a modest recovery.
By 2018, Brazil's GDP growth was slightly more than 1%. In addition to moderate economic growth, the nation is also fighting against corruption, which vitiated the investment atmosphere and dented the confidence of the private investor. Meanwhile, low commodity prices and slack demand have been problems, while Brazil has also struggled with high inflation and interest rates.
- Brazil is the ninth-largest economy in the world and has seen moderate economic growth after falling into recession in 2013.
- The services sector is the largest in Brazil and accounts for 62.9% of GDP as of 2020.
- Agriculture and industry also contribute a substantial amount to Brazil's economic growth.
- Despite periods of high growth—such as 2010 to 2012—Brazil's average growth over the past 35 years is under 3%.
Brazil’s growth graph has been uneven, with periods of very high growth and then intermittent periods of slowdown, as well as dips. This is why, despite achieving high growth rates at times, the average for Brazil over the 35-year period since 1980 is less than 3%.
Despite the dips in growth, Brazil has achieved a lot. The period 2003-2012 witnessed steady growth and reduction in the levels of poverty and income inequality existing in the country. According to the World Bank, “the income level of the poorest 40% of the population increased by an average of 7.1% (in real terms) between 2003 and 2014, compared to a 4.4% increase in income for the population as a whole."
The composition of Brazil’s economy reflects the dominance of its service sector, which composes nearly 63% of its GDP. Industry is the secondary sector and contributes towards a little less than one-fifth of the GDP. Brazil’s agriculture sector has composed roughly 5% of the country's GDP since the 1990s.
Brazil’s transition from a net food importer to one of the largest exporter of agricultural products in the world has been spectacular. Technically, since agriculture represents 5.9% of Brazil’s economy, it cannot be called an agricultural country, but the importance of the sector is far beyond what statistics suggest. The country’s agricultural sector supports its fast-growing agribusiness sector, which has been an essential component of Brazil’s economic progress over the years.
Several factors have helped increase and diversify the production and exports from the agriculture and agribusiness sectors. Examples include modern technology and agricultural research, government policies funding agriculture, and the development of new frontiers for farming since 1970s.
Brazil’s production of agriculture and livestock increased significantly since the 1990s with the second thrust coming in around the millennium change in 2000. The agriculture sector provided more than 9% of the country's total employment as of 2019. Some of the most significant agriculture produce and exporting items are coffee, soybeans, sugar, beef, chicken, orange juice, and corn.
Brazil has a well-diversified and well-developed industrial sector. The rate of expansion in industrial activity was at its peak while the process of import substitution has been carried out in the country. The initial focus of import substitution was on the non-durable consumer goods industry followed by the durable goods industry in the 1960s. The process came to a competition when import of basic raw materials and capital goods was taken up in the latter part of the 1970s.
The whole import substitution industrialization (ISI) policy was exhausted by the start of the 1980s. The period after that witnessed comprehensive programs by the government to push further the development of its industrial sector. Brazil’s industrial growth was high in the 1970s and 1980s, and the 1990s experienced slower growth.
Brazil has advanced industries in the fields of petroleum processing, automotive, cement, iron and steel production, chemical production, and aerospace. Other than these, the food and beverage industry is a very crucial part of the manufacturing sub-sector. The availability of cheap labor and abundance of raw materials has helped Brazil in its industrial development.
3.78 Million Per Day
The number of barrels of oil (crude, petroleum liquids, and biofuels) produced in Brazil in 2020, making it the world's eighth-largest oil producer.
The overall contribution of the industrial sector towards the GDP gradually declined from the mid-1980s to mid-1990s, but it has remained more or less steady since the 1990s. Manufacturing, which is a significant subset of the industrial sector, contributed approximately 9% to the country’s GDP in 2019.
The services sector is the largest sector in Brazil contributing almost 65% to its gross domestic product. The decreasing share of agriculture and industry over the years was taken up by the service sector, which has contributed more than 50% of the country’s GDP since the 1990s. By this time, the service sector looked developed with sub-sectors such hospitality, financial services, retail sales, and personal and professional services.
The service sector is the biggest employer for the country’s workforce. In 2000, approximately 62% of the workforce was employed by the sector, it gradually increased to 65% and now employs 71% of the country’s workforce. Workers are employed in various departments and services like hospitality industry, financial services, repair shops, information technology, as well as bureaucracies at the national and local level as well as public utilities and special agencies.
The financial sector is by far the most important of the services industry in Brazil. The Brazilian banks showed great strength during the 2008 meltdown. The banking sector is the provider of huge funding for mega projects of mining and aerospace among other industries in the country. Other than financial services, travel and tourism are considered essential components of the service sector in Brazil. The direct contribution to Brazil’s GDP from this subsection is around 2.9% as of 2018. It includes the revenue generated by hotels, travel agents, airlines, restaurants, and other directly supported activities.
The Bottom Line
Brazil has been emerging again since the rough patch and recession of 2014. The Latin American country is also adopting needed reforms with an eye on its future growth trajectory. In that respect, raising productivity, competitiveness, and investment are all crucial for successful growth rates in the years ahead.