TremuraConsulting.com - Brazil Overview

Brazil Overview

Overview
There is a basic dichotomy in Brazilian affairs. It starts with the statement that Brazil is a nation where living conditions consistently continue to improve for the lower classes, and, at the same time, has one of the most disproportionate systems of income distribution in the world. Recent economic reports portray markets that are moving forward in positive directions despite social differences. Brazil is going through unprecedented internal changes. They are the result of a search for freedom of choice in the market. The country's changes can be seen through the eyes of the consumer. Today many of the imported goods can be seen in the streets or in the supermarket of any Brazilian city. Yet many of these products remain inaccessible to the vast majority of the population.

Brazilian society is going through a transition from a two-class society. Currently, a small percentage of the population comprises the upper class, while the majority of the people survive with little money or resources. The country is moving toward being a society with a rapidly developing middle class hungry for a better standard of living. Brazil has traditionally kept trade barriers in place, using import limits or bans, and high tariffs. This closed the economy in effect, kept foreign goods and investments out of Brazil, maintaining supplies of high-quality imported products depressed and prices inflated. In an effort to modernize Brazil's economy and raise the standard of living of the average citizen, the Brazilian government has removed many trade barriers and lowered others, and the government is, at least for the time being, actively promoting foreign investment. The Brazilian economy is receiving more international attention and other foreign businesses are moving into the region. Migrants from different parts of the globe are also coming in search of better opportunities, making Brazil a promising new economy.

Reality
The responsabilidade fiscal or budgetary responsibility, was an important step in Brazilian history to change policies regarding expenses of local governments. New laws regulating federal and state taxes and expenditures are in the process of becoming reality. Tax reforms have been discussed for several years and await greater stability within the congress to be voted on. Brazil is going through a social and political process of fighting corruption within all levels of government and other social institutions. These changes have awakened the population to the need for better income distribution and for fighting against political misconduct. Today these differences are being taken more seriously than ever before. The population is getting involved in these discussions and expecting punishment for infractions.

Approximately twelve years ago many world economists predicted that Japan would take control of the world economy. Contrary to these predictions, in these last years the USA has guided the world economy and has heavily invested in the region of South America. The opening of the Brazilian economy presented investors with a virtually untapped market of approximately 170 million people. Brazil and its president Fernando Henrique Cardoso have respected their agreements with international organizations reflecting a commitment never seen in Brazilian history before.

Challenges Ahead
All of the factors explained above and the positive numbers presented by economic reports are today unique to Brazil. A sustainable economy still moves as planned, though Brazil is still vulnerable to other international circumstances, such as prices of foreign oil and economic crises in other emerging countries. To some extent, Brazil does depend on these nations' well-being for its own development and stability. Neighboring Argentina has for several years been going through difficult changes. In the last few weeks many Argentineans went to their local banks and exchanged their currency for US dollars, creating a rumor that the country's economy could soon collapse. The international financial institutions are now concerned that the Argentinean crises will complicate the process of lending money to other Latin American nations. The lack of faith and ability to achieve fast recovery created by these events in Argentina are directly influencing the dollar exchange rate to climb in Brazil. Today it reached US$ 1.00 = R$ 2.30, the highest since the beginning of the Plano Real in 1994.