The Economy - Spectacular Growth, 1968-73

The Economy - Spectacular Growth, 1968-73

The post-1964 reforms and other policies of the military government, together with the state of the world economy, created conditions for very rapid growth between 1968 and 1973. In that period, the average annual rate of growth of GDP jumped to 11.1 percent, led by industry with a 13.1 percent average. Within industry, the leading sectors were consumer durables (see Glossary), transportation equipment, and basic industries, such as steel, cement, and electricity generation.

As a result of the post-1964 policies, external trade expanded substantially faster than the economy as a whole. There was a significant growth in exports, especially manufactured goods, but also commodities. Yet, imports grew considerably faster, rapidly increasing the trade deficit. This did not present a problem, however, because massive inflows of capital resulted in balance of payments surpluses.

The external sector contributed substantially to high growth rates, as did the rapid expansion of investment, including a growing share of public investment and investment by state-controlled enterprises. In addition, increased demand for automobiles, durable and luxury goods, and housing resulted from a rapid growth in income for the upper income strata and from credit plans created for consumers and homebuyers by the capital-market reforms.

The industrial sector generally experienced not only rapid growth but also considerable modernization. As a result, imports of capital goods and basic and semiprocessed inputs increased sharply. The share of intermediate goods imports in total imports increased from 31.0 percent in the 1960-62 period to 42.7 percent in 1972, and that of capital goods, from 29.0 to 42.2 percent. The total value of imports rose from US$1.3 billion to US$4.4 billion.

A comparison of the 1960 and the 1975 shares of the various industrial sectors in total value added by industry reveals a continuation in the relative decline of nondurable industries, notably textiles, food products, and beverages, and an increase in machinery, from 3.2 to 10.3 percent. The relative shares of most of the remaining industries, however, did not change significantly in the period.

As a result of the period's outward-looking development strategy, Brazil's industrial exports increased from US$1.4 billion in 1963 to US$6.2 billion in 1973. The composition of exports shows that whereas in 1963 processed and semiprocessed manufactured exports accounted for only 5 percent of total exports, in 1974 their share had reached 29 percent.

In the 1968-73 period, personal income became more concentrated and regional disparities became greater. Industrial expansion took place more vigorously in the Center-South Region, which had benefited most from the import-substitution industrialization strategy. Its per capita income considerably exceeded the national average, its infrastructure was more developed, and it had an adequate supply of skilled workers and professionals. The region was therefore able to take advantage of the opportunities and incentives offered by the military regime. Although a special regional development strategy existed for the Northeast, it promoted a distorted industrialization that benefited only a few of that region's large cities; the Northeast's linkages with the Center-South were stronger than its linkages within the region. The combination of a harsh climate, a highly concentrated land-tenure system, and an elite that consistently resisted meaningful change prevented the Northeast from developing effectively.

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