The Economy

The Economy

FROM PORTUGAL'S DISCOVERY of Brazil in 1500 until the late 1930s, the Brazilian economy relied on the production of primary products (see Glossary) for exports. Portugal subjected Brazil to a sternly enforced colonial pact, or imperial mercantile policy, which for three centuries heavily curbed development. The colonial phase left strong imprints on the country's economy and society, lasting long after independence in 1822. Measurable changes began occurring only late in the eighteenth century, when slavery was eliminated and wage labor was adopted. Important structural transformations began only in the 1930s, when the first steps were taken to change Brazil into a modern, semi-industrialized economy.

These transformations were particularly intense between 1950 and 1981, when the growth rates of the economy remained quite high and a diversified manufacturing base was established. However, since the early 1980s the economy has experienced substantial difficulties, including slow growth and stagnation. Nevertheless, Brazil still has the potential to regain its former dynamism. In the mid-1990s, it had a large and quite diversified economy, but one with considerable structural, as well as short-term, problems.

Socioeconomic transformation took place rapidly after World War II. In the 1940s, only 31.3 percent of Brazil's 41.2 million inhabitants resided in towns and cities; by 1991, of the country's 146.9 million inhabitants 75.5 percent lived in cities, and Brazil had two of the world's largest metropolitan centers--São Paulo and Rio de Janeiro. The rate of population growth decreased from about 3 percent annually in the 1950s and 1960s to 1.9 percent annually in the 1980-91 period, indicating that Brazil was in a demographic transition. By mid-1997 Brazil had an estimated population of 159.9 million.

The share of the primary sector (see Glossary) in the gross national product (GNP--see Glossary) declined from 28 percent in 1947 to 11 percent in 1992. Despite this reduction, the agricultural sector remains important. Although part of it is primitive and intensive, part is modern and dynamic. Brazil remains one of the world's largest exporters of agricultural products.

In the same 1947-92 period, the contribution of industry to GNP increased from less than 20 percent to 39 percent. The industrial sector produces a wide range of products for the domestic market and for export, including consumer goods, intermediate goods (see Glossary), and capital goods (see Glossary). By the early 1990s, Brazil was producing about 1 million motor vehicles annually and about 32,000 units of motor-driven farming machines. On an annual basis, it was also producing 1.8 million tons of fertilizers, 4.7 million tons of cardboard and paper, 20 million tons of steel, 26 million tons of cement, 3.5 million television sets, and 3 million refrigerators. In addition, about 70 million cubic meters of petroleum were being processed annually into fuels, lubricants, propane gas, and a wide range of petrochemicals. Furthermore, Brazil has at least 161,500 kilometers of paved roads and more than 63 million megawatts of installed electric power capacity.

Despite these figures, the economy cannot be considered developed. Although the economic changes since 1947 raised the country's per capita income above US$2,000 in 1980, per capita income in 1995 was still only US$4,630. Growth and structural change have not altered significantly Brazil's extremely unequal distribution of wealth, income, and opportunity. Despite impressive increments in economic growth and output, the number of poor has risen sharply. Most of the poor are concentrated in the rural areas of Brazil's Northeast (Nordeste) Region, or in the country's large cities or metropolitan areas. The economic and political troubles of the 1980s and early 1990s have only complicated the task of correcting the country's development pattern.

The Colonial Period
The Sugar Cycle, 1540-1640
The Eighteenth-Century Gold Rush
The Economy at Independence, 1822
The Coffee Economy, 1840-1930
A Period of Sweeping Change, 1930-45
Import-Substitution Industrialization, 1945-64
Stagnation, 1962-67
Spectacular Growth, 1968-73
Growth with Debt, 1974-80
Stagnation, Inflation, and Crisis, 1981-94
The 1981-84 Period
The 1985-89 Period
The 1990-94 Period
The Labor Force and Income Levels

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