Economy of Brazil

Brazil is the largest national economy in South America, the world's tenth largest economy at market exchange rates and the ninth largest in purchasing power parity (PPP), according to the International Monetary Fund and the World Bank; with large and developed agricultural, mining, manufacturing and service sectors, as well as a large labor pool. Brazilian exports are booming, creating a new generation of tycoons. Major export products include aircraft, coffee, automobiles, soybean, iron ore, orange juice, steel, ethanol, textiles, footwear, corned beef and electrical equipment. The country has been expanding its presence in international financial and commodities markets, and is regarded as one of the group of four emerging economies called BRIC. The biggest investment boom in history is under way; in 2007, Brazil launched a four-year plan to spend $300 billion to modernise its road network, power plants and ports.

Brazil had pegged its currency, the real, to the U.S. dollar in 1994. However, after the East Asian financial crisis, the Russian default in 1998 and the series of adverse financial events that followed it, the Brazilian central bank temporarily changed its monetary policy to a managed-float scheme while undergoing a currency crisis, until definitively changing the exchange regime to free-float in January 1999. Brazil received an International Monetary Fund rescue package in mid-2002 in the amount of $30.4 billion, a record sum at that time. The IMF loan was paid off early by Brazil's central bank in 2005 (the due date was scheduled for 2006).

One of the issues the Brazilian central bank is currently dealing with is the excess of speculative short-term capital inflows to the country in the past few months, which might explain in part the recent downfall of the U.S. dollar against the real in the period. Nonetheless, foreign direct investment (FDI), related to long-term, less speculative investment in production, is estimated to be $193.8 billion for 2007. Inflation monitoring and control currently plays a major role in Brazil's Central Bank activity in setting out short-term interest rates as a monetary policy measure.

Brazil's economy is diverse, encompassing agriculture, industry, and a multitude of services. The recent economic strength has been due in part to a global boom in commodities prices with exports from beef to soybeans soaring. Agriculture and allied sectors like forestry, logging and fishing accounted for 5.1% of the gross domestic product in 2007. A performance that puts agribusiness in a position of distinction in terms of Brazil's trade balance, in spite of trade barriers and subsidizing policies adopted by the developed countries.

The industry; from automobiles, steel and petrochemicals to computers, aircraft, and consumer durables; accounted for 30.8% of the gross domestic product. Industry is highly concentrated geographically, with the leading concentrations in metropolitan São Paulo, Rio de Janeiro, Campinas, Porto Alegre, and Belo Horizonte. Technologically advanced industries are also highly concentrated in these locations.

Brazil is the world's tenth largest energy consumer. Its energy comes from renewable sources, particularly hydroelectricity and ethanol; and nonrenewable sources, mainly oil and natural gas. A global power in agriculture and natural resources, Brazil witnessed tremendous economic growth over the past three decades. Brazil is expected to become a major oil producer and exporter, having recently made huge oil discoveries. The governmental agencies responsible for the energy policy are the Ministry of Mines and Energy, the National Council for Energy Policy, the National Agency of Petroleum, Natural Gas and Biofuels, and the National Agency of Electricity.

Brazilian science effectively began in the first decades of the 19th century, when the Portuguese Royal Family, headed by John VI, arrived in Rio de Janeiro, escaping from the Napoleon's army invasion of Portugal in 1807. Until then, Brazil was a Portuguese colony, without universities, and a lack of cultural and scientific organizations, in stark contrast to the former American colonies of the Spanish Empire, which although having a largely illiterate population like Brazil and Portugal, had, however, a number of universities since the 16th century.

Technological research in Brazil is largely carried out in public universities and research institutes. Nonetheless, more than 73% of funding for basic research still comes from government sources.Some of Brazil's most notable technological hubs are the Oswaldo Cruz Institute, the Butantan Institute, the Air Force's Aerospace Technical Center, the Brazilian Agricultural Research Corporation and the INPE. The Brazilian Space Agency has the most advanced space program in South America, with significant capabilities to launch vehicles, launch sites and satellite manufacturing.

A VLS model satellite launch vehicle entirely designed and produced in Brazil. On 14 October 1997, the Brazilian Space Agency signed an agreement with NASA to provide parts for the ISS. Uranium is enriched at the Resende Nuclear Fuel Factory to fuel the country's energy demands. Plans are on the way to build the country's first nuclear submarine. Brazil is one of the three countries in South America with an operational Synchrotron Laboratory, a research facility on physics, chemistry, material science and life sciences.

Brazil has today a well developed organization of science and technology. Basic research is largely carried out in public universities and research centers and institutes, and some in private institutions, particularly in non-profit non-governmental organizations. Thanks to governmental regulations and incentives, however, since the 1990s is has been growing in the private universities and companies, as well. Accordingly, more than 90% of funding for basic research comes from governmental sources.

Applied research, technology and engineering is also largely carried out in the university and research centers system, contrary-wise to other countries such as the United States, South Korea, Germany, Japan, etc. Companies such as Motorola, Samsung, Nokia and IBM have established large R&D&I centers in Brazil, starting with IBM, which had established an IBM Research Center in Brazil since the 1970s. One of the incentive factors for this, besides the relatively lower cost and high sophistication and skills of Brazilian technical manpower, has been the so-called Informatics Law, which exempts from certain taxes up to 5% of the gross revenue of high technology manufacturing companies in the fields of telecommunications, computers, digital electronics, etc.

The Law has attracted annually more than 15 billion dollars of investment in Brazilian R&D&I. Multinational companies have also discovered that some products and technologies designed and developed by Brazilians have a nice competitivity and are appreciated by other countries, such as automobiles, aircraft, software, fiber optics, electronics, games, personal computers and so on.