Who put the B in BRIC?
Posted: March 24, 2010
Investment bank Goldman Sachs coined the term BRIC in 2001 to describe the rapid developing economies of Brazil, Russia, India and China. Except to football fanatics, Brazil may be largely an unknown to many Australians. It is now the world's eighth largest economy with a population of over 195 million. It has seen rapid growth in recent years and like Australia has recovered quickly from the 2008 world slowdown.
Also like Australia, Brazil is an exporter especially to the USA, China, the rest of South America and Germany. The major exports are iron ore, steel, oil and manufactured goods such as cars, aircraft and consumer goods. In fact 84% of its exports are of manufactured or semi processed goods. That makes it very different to Australia in terms of the mix of its exports.
Oil exploration particularly offshore is an exciting development and Brazil leads the world in deep water drilling technology. However Brazil does have a shortage of coal suitable for steel smelting - a gap Australia helps to fill.
Many Australian mining and agricultural businesses operate in Brazil with partnerships in exploration, processing, transport and technology. Both countries are involved in research into ethanol production as an oil replacement.
Agriculture represents just 4% of the economy though Brazil produces 40% of the world's soya beans, has more cattle than people and produces 25% of the world's sugar cane.
But if there is one thing for which Brazil is universally known it is the mighty Amazon River and the surrounding Amazon Rainforest. The Amazon River basin is 4,195 miles long and the Amazon Rainforest occupies 40% of Brazil's total land mass. It is thought to be the oldest tropical rainforest in the world - some 100 million years old. The battle to preserve this magnificent region has captured the attention of many supporters around the world.
Like all rapidly developing nations Brazil is not without its problems. There is a massive inequality in wealth with an estimated 25% of the population living in poverty. The Government has implemented many social policies including land reform, education and work programs. For example, the Family Fund Program provides a stipend to parents to feed and clothe their children provide they keep them in school and take them for medical checkups.
Political stability under President Lula has enabled Brazil to maintain their impressive rate of development. His policies are based on developing free markets and engaging with the global economy as key ways to build the wealth of the whole country. The 2010 presidential election will be a critical to maintaining the current momentum.
Many of Brazil's largest companies have gone global with 28 listed in the top 2000 businesses in the world. For investors, a new stock exchange called Novo Mercado was launched in 2000 where only companies that commit to significantly higher corporate governance standards are allowed to list.
The football world cup and the Olympics will require massive investment in infrastructure which will fuel the local economy. Similar to the Australian experience it is hoped that these events will unite the country and position it for further development on the world stage.