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With a gross domestic product (GDP) of approximately US $ 2.353 trillion (2014), Brazil is the seventh largest economy in the world. The per capita income is approximately $ 11,604.5. The success of the Brazilian economy lies in its high degree of diversification. Approximately 69 percent of the gross value added is provided in the service sector, 25 percent in industry, and about 6 percent of the GDP share is contributed by agriculture. In addition, the production and processing of agricultural commodities is a significant force in Brazil’s economy and amounts to 23 percent of the country’s GDP.
The high growth rates and robust employment growth in recent years is attributed to the recent global economic interest in Brazil. A significant increase in employment was in the formal labor market (comprising 50 percent of employed workforce) with 2.2 million people. This lead to the lowest ever overall unemployment rate recorded in the country, at 4.3 percent (in December, 2014). In the wake of the explosion in global commodity prices, rising wages and increased access to consumer credit, Brazil’s GDP was predicted to continue to expand strongly but the figures have fallen apart in recent years. This is mostly due to the recent sharp fall observed in prices of Brazil’s chief exports of iron ore, oil, ethanol and processed food products. Consequently, the inflation has risen remarkably from 4.3 percent to staggering 9.5 percent in November, 2015.
Since 2012, the growth of the Brazilian economy, has significantly weakened. 2013 saw a growth rate of approximately 2.3 percent; at the end of 2014, Brazil recorded almost zero growth at close to 0.1 percent. For 2015 and 2016, a recession of between -1 to -3 percent percent mark is predicted. Consequently, the situation in the labor market also deteriorates. With more than 200 million inhabitants of the strong domestic market, over 80 percent share of the GDP remains attributed to it. The foreign trade plays a relatively minor role with around 20 percent share of the GDP. A major challenge for economic growth, is the very low and further declining investment to GDP ratio of below 20 percent.
The largest export markets for Brazil in 2014 were the European Union with a share of 18.7 percent, China with 18 percent and the US with 21.1 percent. The Brazilian export is still dominated by commodities. The main export products include soy products, meat, sugar, ethanol and iron ore. Most imports come into the country from EU, China, USA and Argentina.
Brazil also recorded a significant influx of foreign direct investment to the amount of 62.5 billion US dollars in 2014. Although this value is slightly below the levels of the past two years, but it clearly shows that Brazil continues to be an attractive location for foreign investments.
Why invest in Brazil?
- Due to its central location, Brazil serves as the main area for investment for any business looking to expand into Latin America. The mammoth country enjoys a dominant role in the region’s geography, and borders all countries in the continent apart from Ecuador and Chile. This allows for seamless integration into the region’s economy.
- The last few years have seen an attractive return on investment in Brazil with a mean rate of 26 percent annually. To make matters even more appealing, foreign enterprises settled in Brazil are unrestricted from sending their profits back to their country of origin.
- Brazil also has a very viable energy matrix, close to half (46 percent) of which comprises of electricity obtained from renewable sources. This allows for the cost of electricity to be low and sustainable.
- Since 2013, the Brazilian government has introduced several business-friendly reforms that allowed for reduced electricity costs, lower tax burdens and interest rates.
- Brazil’s government places special emphasis on research and development which is the reason why the country produces around 10,000 doctoral papers and more 30,000 master’s papers annually.