After the kick off article Focus on Brazil, we continue to cover the story behind Brazil’s economic boom. This time we focus on the roots of this financial revolution; Brazil’s financial carnival began in the middle 90’s when the inflation was lowered, foreign exchange and investments became available and many government institutions were privatized. Since then the financial boom gave its toll and over the years many Brazilian companies became giant worldwide corporations, such as the national oil company Petrobras, the mining company Vale or Embraer- one of the biggest private jets producer in the entire world. So, what’s the story behind the now so obvious Brazilian popularity and success? Where did it all start?
Coffee beans' high price helped Brazil
While the whole world is suffering from a decrease in foreign investments because of the financial crisis, the same kind of investments in Brazil grow by 30%. This is only one of the reasons why Brazil is the leading and biggest economy in South America and only second to the US in the entire American Continent. “There is consent between South American countries about Brazil: They all agree it is the leading country” according to experts. “If once Brazil, Argentina and Mexico disagreed about who is leading the flock, it’s now clear to both the latter that Brazil is the one”, they continue.
The success of this South American country also relies on luck and a lot of it. Brazil, the number one exporter of sugar canes and coffee beans in the world and a big exporter of cacao, tobacco and soy beans as well, has really enjoyed the continuing price rises of these commodities in the global markets in the last few years. Most of the wealth in Brazil, like other surrounding countries, is owned by a small part of society, while most of the citizens are living in poverty. According to the Gini inequality index, Brazil is located at the 10th place out of 126 countries, but it is a good improvement- in 1989 Brazil was ranked second.
These cracks in the Brazilian society are right there on the surface for everyone to see. Take Sao Paulo for instance, out of the city’s 10 million residents, 30 thousand are millionaires. It is hard to miss all the choppers which are swirling between the city’s skyscrapers, which nearly all of them have a landing spot. The millionaires simply prefer to skip the unbearable traffic jams by traveling by air and it shows: Sao Paolo is the leading city in the world in terms of private helicopters, surpassing New York and Tokyo. On the contrary, residents of the poorer neighborhoods can’t even pay a taxi ride.
Nevertheless, in the last few years the social gap is narrowing gradually. As mentioned in the previous article, the middle class has grown and then some. With more than 20 million Brazilians who joined it lately, it is a big impact. Still, millions of others remained poor but have managed to improve their financial status to some extent. The Global Bank also reported that between 2002-2006 the social deficits have narrowed by 6%. The man in charge is no other than Brazilian President, Luiz Inacio Lula da Silva, also known as “Lula”.
Born in the north, the Brazilian president had a poor childhood and had to work since the age of 14. He was elected as a candidate of the Brazilian labor party, while promising profound reforms. Because of political arguments and compromises he didn’t fulfill his promise to the end, but he did make a mark. The most significant step was a massive investment through loans by the government, in the citizens themselves.
Following the government, the private market also increased its credit eligibility. Ten years ago, only few Brazilians had a credit card, even fewer had a mortgage. Today, more and more Brazilians use and enjoy both. This in turn has helped the Brazilian market: millions of citizens became potential consumers of different merchandise, which in turn influenced investors to come flooding in.
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