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• Overview: 
 
Brazil is the eighth-largest economy in the world, with 1997 GDP over $800 billion. It is a highly diversified economy with
wide variations in levels of development. Most large industry is concentrated in the south and southeast. Although
traditionally the poorest part of Brazil, the northeast is beginning to attract new investment. 

Brazil embarked on its most successful economic stabilization program, the Plano Real (named for the new currency, the
real; plural: reais) in July 1994. 

Inflation--which had reached an annual level of nearly 5000% at the end of 1993--has since dropped to its lowest level in
over 40 years and is expected to be less than 5% in 1998. Brazil has accomplished this through a combination of a strong
exchange rate, tight monetary policies, trade liberalization, and privatization. 

In addition, the Cardoso Administration has introduced to Congress a series of constitutional reform proposals to replace
a state-dominated economy with a market-oriented one and to restructure all levels of government on a financially sound
basis. Congress has approved amendments to open the economy to greater private sector participation, including foreign
investors. Reforms to bring order to government fiscal accounts have made less progress--because of their greater
political sensitivity--but remain under consideration by the Congress. The Administration places great importance on these
fiscal reforms for sustainable long-term growth. The Plano Real has raised the income of poor Brazilians, but Brazil
continues to have one of the world's most inequitable distributions of income. The administration has acknowledged the
need to invest more in education and health to redress this inequity. 

Market liberalization and economic stabilization have significantly enhanced Brazil's growth prospects. Brazil's trade has
almost doubled since 1990, from $50 billion to an estimated $114 billion in 1997. The United States represents about
20% of that trade, and ran trade surpluses in 1995, 1996, and 1997 after many years of deficits with Brazil. Foreign
direct investment has increased from less than $1 billion in 1993 to an estimated $17 billion in 1997. The United States is
the largest foreign investor in Brazil, accounting for almost $20 billion, or 34% of total foreign investment. Ongoing and
upcoming privatization in the telecommunication, energy, and mining sectors of Brazil planned for 1998 and 1999 is of
major interest to U.S. companies. 

Brazil responded quickly and decisively to the Asian financial crisis in October 1997, which brought strong pressure to
bear on the domestic currency. These actions included a near doubling of interest rates, maintenance of an exchange rate
policy in the face of large capital outflows, and Congressional approval of a fiscal package aimed at saving $18 billion in
1998, 2.5% of GDP. Financial markets responded positively to these measures and capital inflows, including direct
investment, increased strongly. By March 1998, international reserves recovered to their pre-crisis level of $62 billion. 

Brazil is endowed with vast agricultural resources. There are basically two distinct agricultural areas. The first, comprised
of the southern one-half to two-thirds of the country, has a semi-temperate climate and higher rainfall, the better soils,
higher technology and input use, reasonable infrastructure, and more experienced farmers. It produces most of Brazil's
grains and oilseeds and export crops. The other, located in the drought-ridden northeast region and in the Amazon basin,
lacks well-distributed rainfall, good soil, adequate infrastructure, or sufficient development capital. Although producing
mostly for self-sufficiency, the latter regions are becoming increasingly important in exports of forest products, cocoa, and
tropical fruits. Central Brazil contains substantial areas of grassland with only scattered trees. The Brazilian grasslands are
less fertile than those of North America and are generally more suited for grazing. 

Brazilian agriculture is well diversified, and the country is largely self-sufficient in food. Agriculture accounts for 13% of the
country's GDP, and employs about one-quarter of the labor force in more than six million agricultural enterprises. Brazil is
the world's largest producer of sugarcane and coffee, and a net exporter of cocoa, soybeans, orange juice, tobacco,
forest products, and other tropical fruits and nuts. Livestock production is very important in many sections of the country,
with a large increase in the poultry, pork, and milk industries due mainly to demand changes. On a value basis, production
is 60% field crop and 40% livestock. 

Brazil is a net exporter of agricultural and food products, which account for about 35% of the country's exports. In 1996,
farm and food exports totaled $17 billion. Record levels of imports amounted to nearly $8 billion. In 1994 and 1995,
agricultural exports were hurt by the sharp appreciation of the Brazilian real, lack of export financing, and high taxes and
port costs. On the other hand, agricultural and food imports grew substantially during this period as a result of production
shortfalls, lower prices due to import liberalization and a strong currency, and increased consumer demand. In the long
run, however, the annual growth of agricultural imports is expected to be more moderate in the future. 

Half of Brazil is covered by forests, with the largest rain forest in the world located in the Amazon Basin. Recent
migrations into the Amazon and large-scale burning of forest areas have placed the international spotlight on Brazil. The
government has reduced incentives for such activity and is beginning to implement an ambitious environmental plan, and
has just adopted an Environmental Crimes Law that requires serious penalties for infractions. 

Brazil has one of the most advanced industrial sectors in Latin America. Accounting for one-third of GDP, Brazil's diverse
industries range from automobiles, steel, and petrochemicals, to computers, aircraft, and consumer durables. With the
increased economic stability provided by the Plano Real, Brazilian firms and multinationals have invested hundreds of
millions of dollars in new equipment and technology, a large share of which has been purchased from U.S. firms.
However, the country's power, transportation, and communications systems--particularly outside the more developed
southern states--suffer from lack of investment and poor maintenance. The privatizations of the telecommunication,
energy, and transportation sectors are expected to ameliorate these infrastructure problems. 

Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the banking sector accounted for
as much as 16% of GDP. Although undergoing a major overhaul, Brazil's financial services industry provides local firms a
wide range of products and is attracting numerous new entrants, including U.S. financial firms. The Sao Paulo and Rio de
Janeiro stock exchanges have been among the fastest growing in the world in the last two years. 

The Brazilian Government has undertaken an ambitious program to reduce dependence on imported oil. Imports
previously accounted for more than 70% of the country's oil needs but now account for less than 50%. Brazil is one of the
world's leading producers of hydroelectric power, with a potential of 106,500 megawatts. 

Existing hydroelectric power provides 90% of the nation's electricity. Two large hydroelectrical projects, the 12,600
megawatt Itaipu Dam on the Parana River--the world's largest dam--and the Tucurui Dam in Para in northern Brazil, are
in operation. 

Brazil's first commercial nuclear reactor, Angra I, located near Rio de Janeiro, has been in operation for more than 10
years. Angra II is under construction, and Angra III is planned. The three reactors would have combined capacity of
3,000 megawatts when completed. 

Proven mineral resources are extensive. Large iron and manganese reserves are important sources of industrial raw
materials and export earnings. Deposits of nickel, tin, chromite, bauxite, beryllium, copper, lead, tungsten, zinc, gold, and
other minerals are exploited. High-quality coking-grade coal required in the steel industry is in short supply. 
 
 
 

• National product: 
GDP - purchasing power parity - $886.3 billion (1997 est.) 
 
• National product real growth rate: 
5.3% (1997 est.) 
 
• National product per capita: 
$5,580 (1997 est.) 
 
• Inflation rate (consumer prices): 
1,094% (1997 est.) 
 
• Unemployment rate: 
4.9% (1996) 
 
• Budget: 
 
revenues: 
$113 billion 
 
expenditures: 
$109 billion, including capital expenditures of $23 billion 
 
• Exports: 
$43.6 billion 
 
commodities: 
iron ore, soybean bran, orange juice, footwear, coffee, motor vehicle parts 
 
partners: 
EC 27.6%, Latin America 21.8%, US 17.4%, Japan 6.3% 
 
• Imports: 
$33.2 billion 
 
commodities: 
crude oil, capital goods, chemical products, foodstuffs, coal 
 
partners: 
US 23.3%, EC 22.5%, Middle East 13.0%, Latin America 11.8%, Japan 6.5% 
 
• External debt: 
$134 billion (1996) 
 
• Industrial production: 
growth rate 9.5% (1993); accounts for 39% of GDP 
 
• Electricity: 
 
capacity: 
55,130,000 kW 
 
production: 
241.4 billion kWh 
 
consumption per capita: 
1,589 kWh (1993) 
 
• Industries: 
textiles, shoes, chemicals, cement, lumber, mining (iron ore, tin), steel making, machine building - including aircraft, motor vehicles, motor vehicle parts and assemblies, and other machinery and equipment 
 
• Agriculture: 
accounts for 11% of GDP; world's largest producer and exporter of coffee and orange juice concentrate and second-largest exporter of soybeans; other products - rice, corn, sugarcane, cocoa, beef; self-sufficient in food, except for wheat 
 
• Illicit drugs: 
illicit producer of cannabis and coca, mostly for domestic consumption; government has a small-scale eradication program to control cannabis and coca cultivation; important transshipment country for Bolivian and Colombian cocaine headed for the US and Europe 
 
• Economic aid: 
 
recipient: 
US commitments, including Ex-Im (FY70-89), $2.5 billion; Western (non-US) countries, ODA and OOF bilateral commitments (1970-89), $10.2 million; OPEC bilateral aid (1979-89), $284 million; former Communist countries (1970-89), $1.3 billion 
 
• Currency: 
1 real (R$) = 100 centavos 
 
• Exchange rates: 
R$ per US$1 - 0.85 (January 1995); CR$ per US$1 - 390.845 (January 1994), 88.449 (1993), 4.513 (1992), 0.407 (1991), 0.068 (1990) 
 
note: 
on 1 August 1993 the cruzeiro real (CR$), equal to 1,000 cruzeiros, was introduced; another new currency, the real, was introduced on 1 July 1994, equal to 2,750 cruzeiro reals 
 
• Fiscal year: 
calendar year