FATHER SATURNINO URIOS UNIVERSITY

ECONOMIC DEVELOPMENT

COUNTRY PAPER ANALYSIS

BRAZIL

Individual
Name Group Score Paper Score TOTAL
Score

Cantaros, Precious
Anne

Dobles, Kezeah May

Garciano, Lloren Hazel

Santillana, Jella

Tagab, Jessa

Tamorite, Lyra

Tuyor, Carloine Jay

Villalon, Jericho

Zaldivar, Jee-Ann

CHAPTER I

POVERTY, INEQUALITY AND DEVELOPMENT

Poverty & Growth and Inequality & Growth

Brazil has been dubbed as one of the countries which shows the worst
patterns of income distribution in the world during the mid-nineties. But as their
Federal Government shifted gears during the last decade, they came up with
policies and programs which regulates social responsibility with coordination,
funds, and goals to uplift Brazilian families living in poverty. Now as a result,
improvements could be seen in both sides of its economy (Queiroz, 2006).

Now, Brazil has been experiencing high growths and investment rates
which led its way to multiple development and economic transformations. In
particular, it increased the equality in the distribution of income which resulted to
a reduction in poverty level and went through some structural changes (ISPI,
2012). These changes caused Brazil to better manage the effects of financial
crisis better than any other countries in the world. Below is a fused graph of
Brazil’s Gini Index and poverty headcount ratio or the percentage of people living
below the national poverty line for the 10-year period of 2005 to 2015 based on all
available data gathered.

Graph 1. Brazil's Poverty and Inequality Rate (2005-2015)

25 0.57
0.56
20 0.55
0.54
15
% of Population 0.53

Gini Index
0.52
10
0.51

5 0.5
0.49
0 0.48
2005 2006 2007 2008 2009 2011 2012 2013 2014 2015
% of population living below
21 17.3 16.1 14.1 13.3 11.1 9 8.9 7.4 8.7
the national poverty line
Gini Index 0.566 0.559 0.552 0.544 0.539 0.531 0.527 0.529 0.515 0.513

(Source: World Bank & Index Mundi)

The graph presented will be helpful in determining the development of

Brazil’s economy since both of the data is somehow positively correlated with
each other in the case of Brazil. As what can be seen from the graph, during 2005,
the percentage of poor people living below the national poverty line, which is less
than $6.88 or 1.7 USD a day for November 2011 (which is what was used for this
calculation), is 21% or 39 million people out of the 186 million people living in
Brazil in 2005 (World Bank, 2015). And this shows a great sign of improvement in
the country when compared to an all-time high of 25% in 1995 and 22.4% in 2004.
Together with this, the Gini coefficient or the measure of inequality in income
distribution amongst Brazilians have also declined with an index of 0.566 at the
end of year 2005 when compared to the highest inequality index of 0.625 during
1989 and 0.569 in 2004, according to a study conducted by Ferreira & Leite
(2006). Though 0.566 is within the bracket of a highly unequal distribution of
income, it still shows a positive outcome for a country like Brazil, especially that
for the past years, inequality in its country have been decreasing. More
specifically, this means that more than 40 million people have improved their
standards of living for the past 10 years, now being reclassified within the country
as “middle class” which also means that every year, a small fraction of the poor
population are migrating to a higher level.

Graph 2. GNI and GDP per capita of Brazil (2008-2017)

$14,000.00

$12,000.00

$10,000.00
Current USD

$8,000.00

$6,000.00

$4,000.00

$2,000.00

$0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP Per Capita 10,656.9 10,538.8 11,224.2 11,560.4 11,673.8 11,915.4 11,870.1 11,351.6 10,868.7 10,888.9
GNI Per Capita 8,929.32 8,956.17 9,380.46 9,866.87 10,459.7 10,829.5 10,932.8 10,594.8 10,326.4 10,366.1

GDP Per Capita GNI Per Capita

(Source: World Bank & Trading Economics)

The GNI and GDP per capita graph above is also helpful as a visual guide
in determining that poverty relates to the overall health of the economy of Brazil.
That together with the growth of the economy, opportunities for employment and
income also grow. The graph shows that Brazil has a high GDP and GNI per
capita which could be classified as an “upper middle income country” based on its
GNI per capita which is between $4,086 to $12,615 according to the classification
of the World Bank in 2013. (Grunewald, 2006).

Figure 1. Poor Regions of Brazil

 (Source: Brazil Institute of Geography and Statistics)

The figure above is another determinant of Brazil’s poverty through states

which also supports the first graph. It tells us that there are only three poorest
states in the country in which the government should double its efforts in
lessening poverty in these places namely Maranhao, Piaui, and Alagoas.

As shown in the first graph, in the succeeding years, it is visible that both
the inequality in income distribution and percentage of poor people living below
the national poverty line is decreasing continuously. However, there are some
periods from 2005 to 2015 in which the country’s percentage of people below the
poverty line increases a bit just like in 2015 and in the same case, the Gini index
in 2013. This is because apart from the positive changes happening in Brazil’s
economy, the fact still couldn’t be changed that no economy is 100% perfect, and
that despite of improvements, there are still problems occurring even within the
economy of the most highly developed country. These are considered to be
normal things happening within a country’s economy but Brazil have always
come up with a way to overcome these economic challenges.
Economic Characteristics of High-Poverty Groups

Rural Poverty

Despite the progressing economy of Brazil, poverty still exists. 17% of the
total population of Brazil is the rural population and 61% of it is black. 75% of the
rural population are employed mostly in agriculture and the other 25% are living
in extreme poverty even though the program called Bolsa Familia has been
implemented. The main reason that causes poverty in the rural areas is inequality
in terms of land tenure, and improper allocation and scarcity of water system.
Despite water shortages in rural areas, they can still produce 50% of the food
supply for the country even though there are only few people or farmers who own
a land. In other circumstances, climate is a factor that can contribute poverty. For
instance, Sertão located in northeast of Brazil is the poorest in the country. This
place is prone in drought and flooding that makes people living in this place lives
in extreme poverty.

Women and Poverty

The majority of the world’s poor population is actually made up of women. Not
only children, but also women, experience the harshest deprivation in the
developing world. They are often at a disadvantage. With this line of thought,
Brazil has made great efforts in achieving gender equality. However, women
were left behind as the country took big steps towards education and health
advancements, according to a study published by World Bank in 2017. In Brazil,
women with African or indigenous descent were the ones most likely vulnerable
to inequality. In fact, indigenous women were particularly subject to violence. A
survey conducted found that Brazil has the fifth highest rate of femicide. Femicide,
as defined by the World Health Organization (WHO), generally refers to
intentional murder of women because they are women. The rate was more than
70% between 2003 and 2013 in its north and northeast regions, where majority of
the Afro-Brazilian and indigenous population was located. The average homicide
rate among women in Brazil in 2012 was 4.6 per 100,000. Yet, the rate among
indigenous women was 7.3 per 100,000.

Gender wage gaps also remain wide in the country. According to a 2010
World Bank study, women’s wages were far lower than those of men with a gap
of 71%, considered to be one of the largest gaps in Latin American countries.

Indigenous Populations

0.4% of the total population of Brazil which is equivalent to approximately

900,000 people are part of indigenous groups in Brazil that is divided into 240
tribes. The government of Brazil are reaching out to them to give them goods and
services in terms of health and education, and to protect their rights especially
because there are some murder cases that involve the indigenous groups. But
some of them are still uncontacted because of resisting all the intruders from
entering their territory. As of now, the tribe named Tikuna which has a population
of approximately 41,000, is the largest Amazonian tribe in Brazil. Indigenous
groups play an important role in this world by the reason that they are responsible
for protecting and preserving our nature which is vital for our survival.

Policies

Basically, the poor people in Brazil are those having low incomes that are
not enough to meet their basic needs such as food, clothing and shelter and
having low or no access at all to education and health. But Brazil has obviously
come up with solutions into lessening these problems. According to Penha &
Gustavo (2008), the main tools which drives Brazil’s economy to improvement
are the economy’s structural, social and institutional changes. More importantly,
Brazil has implemented some reforms that have changed dramatically its
economy and managed to do impressive social progress, with the highest poverty
reduction in its history and a decrease in its income inequality. As an outcome,
the country built around these three sets of social policies which were: (1)
strengthening of domestic markets by governmental procurement and tax relief
schemes; (2) increases in basic income transfers; and (3) increases in social
security spending (ISPI, 2012). One product of the second policy was the “Bolsa
Familia” — a cash transfer program that gives money to impoverished families
under the condition that they keep their kids vaccinated, send them to school and
take them for regular health checks, and 94% of these funds reach the poorest 40%
of the population (World Bank, 2010). This program is granted to households who
have one or more children younger than 15 years old, or with pregnant or
lactating women. The aid is R$35 per month, per qualified member of the
household and is limited to no more than 5 qualified members per household
(Bruha, 2014).

Another one was the progressive taxation in Brazil that did a positive
impact in narrowing down the gap between the rich and the poor, like how the top
1% pays 37% of the total sum of the country’s income tax, while the bottom 50%
pays less than 4%. Credit was also made available through the official banks in
microcredit schemes to promote local agricultural production and these are only a
few of the successful policies of Brazil which caused its economy to rise having
only 8.7% of the population living below the national poverty line in 2015 and a
Gini index of 0.513 in the same year (Penha & Gustavo, 2008).
 CHAPTER II

POPULATION GROWTH AND ECONOMIC DEVELOPMENT

Demographic Transition

Graph 3. Brazil Birth Rate per 1,000

2… 20.204
1… 20.753
1… 21.256
1… 21.716
1… 22.139
1… 22.54
1… 22.94
1… 23.365
1… 23.838
1… 24.37
1… 24.979
1… 25.677
1… 26.452
1… 27.278
1… 28.134
1… 28.982
1… 29.783
1… 30.508
1… 31.135
1… 31.655
1… 32.059
0 5 10 15 20 25 30 35

(Source: World Bank)

The graph above indicates the average annual number of births during a year
per 1,000 population. Every year, the birth rate in Brazil is declining. In 1980, birth
rate of Brazil was 32.059 per 1,000 population. As the graph above shows, the
birth rate of Brazil fell gradually from 32.059 per 1,000 people in 1980 to 20.204
per 1,000 people in 2000. The birth rate has fallen due to a number of factors
quite complex and include a mixture of (1) urbanization, industrialization and
growth of services; (2) an increase of female labor; (3) less need for children; (4)
less pressure in women to have children; (5) a falling death rate, which means
replacement births are less needed.

Graph 4. Brazil Death Rate per 1000

2000 5.994
6.073
1998 6.17
6.282
1996 6.407
6.542
1994 6.681
6.822
1992 6.961
7.097
1990 7.232
7.369
1988 7.511
7.659
1986 7.812
7.97
1984 8.127
8.282
1982 8.43
8.57
1980 8.699
0 1 2 3 4 5 6 7 8 9 10

(Source: World Bank)

The graph indicates the number of deaths per 1,000 population in Brazil from
year 1980 to 2000. A decline in mortality rate occur every year due to expanding
public health system, urbanization, and sanitation. In 1980, there were about
8.699 deaths per 1,000 people. Similar to the birth rate of Brazil, the death rate
also fell from 8.699 per people in 1980 to 5.994 per people in 2000.
Age Structure

Graph 5. Brazil Age Structure

100%
6.22 6.38 6.55 6.73 6.95 7.18 7.42 7.68 7.96 8.25 8.55
90%

80%

70%

60% 67.38 67.72 68.04 68.36 68.65 68.91 69.14 69.35 69.53 69.62 69.7
50%

40%

30%

20%
26.39 25.9 25.41 24.9 24.4 23.91 23.43 22.96
10% 22.51 22.14 21.75

0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0-14 years 15-64 years 65 years and older

(Source: Statista)

The graphs shows a statistics of the age structure in Brazil from the period of
2007 to 2017. As illustrated above, about 21.75 %of Brazil's total populations
were aged 0 to 14 years in 2017. With a total population of more than 200 million
inhabitants, Brazil is fifth in the list in the world by area and population and the
largest the Latin American region. Due to a steady increase in the life expectancy
in Brazil, the average age of the population has also rapidly increased. From
1950 until 2015, the average age of the population increased by an impressive 12
years; in 2015, the average age of the population in Brazil was reported to be
around 31 years. As a result of the increasing average age, the percentage of
people aged between 15 and 64 years has also increased: In 2013, about
68.4 %of the population in Brazil was aged between 15 and 64 years.

Graph 6. Brazil Age Dependency Ratio

54

52

50

48

46

44

42

40

38
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source: World Bank)

 The dependency burden, which is the ratio of dependent young and old to the
population of working age, varies as a country moves through demographic
transition. The age dependency ratio for Brazil is calculated as follows:

Age dependency = (people younger than 15 and older than 64) / (working
age people ages 15-64)

A higher value for Brazil and other countries means that employed people
have to support more non-working people, either young or old. The latest value
for age dependency ratio (% of working-age population) in Brazil was 43.64 as of
2016. Over the past 56 years, the value for this indicator has fluctuated between
52.6 in 2002 and 43.64 in 2016.

Policies

The population of Latin America’s largest country is very diverse, as it

comprised a number of ethnic groups and races. For a long time, population
policy has been a sensitive issue in the country. Therefore, Brazil’s population
policies tend to be broader and more flexible. It prioritizes the distribution of
population and to increase a large section’s standards of living. As seen in Graph
4 in the previous page, Brazil has a decreasing death rate.

In redistributing Brazil’s population, there are two forms of movement, namely,

spontaneous (voluntary) and state-sponsored (with government incentives
offered). Employment, services and houses were lacking due to an increase in
urban population that resulted from rural-urban migration. The Amazon accounts
for 60% of Brazil but only 10% of its population. The challenge was on how to
encourage the people to move from shantytowns or favelas and the densely
crowded rural areas to transfer to the inner part of the country where the rural
areas are remote and less densely populated. For the purpose of developing,
exploiting and settling the Amazon, the Brazilian government in 1970s,
established a National Integration Plan. The said policy allowed people from the
overpopulated North East region to emigrate. However, it received a lot of
negative feedback due to the lack of follow-up support, such as providing
insufficient resources for the settlers.

In the late seventies, the organized women of Brazil joined the controversy in
the population policy making. They fought for a universal access to health
assistance. In 1983, the Programa de Assistência Integral à Saúde da Mulher
(PAISM) or Program for an Integral Assistance to Women’s Health was
established. The program emphasized participatory actions and health education,
with a framework for policy based on the needs of women at all stages of their life
cycle. However, data shows that the situation on the health of Brazilian women
appeared to be stagnant. This is due to an increase of women getting female
sterilization and a decrease in the use of hormonal pills, between 1986 and 1991
(Berquó, 1994).

CHAPTER III

URBANIZATION AND RURAL-URBAN MIGRATION DEVELOPMENT

Relationship of Urbanization and Economic Growth

 Graph 7. Brazil: Degree of Urbanization (2008-2017)
100%
90% 83.75% 84.04% 84.34% 84.62% 84.90% 85.17% 85.43% 85.69% 85.93% 86.17%
80%
Share of urban inhabitants in total

70%
60%
population

50%
40%
30%
20%
10%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source: Statista)

The graph presented above indicates the growth of urbanization in Brazil or

the percentage of the total population within the country who are now living in the
urban areas or the cities. As the graph suggests, the population living within the
cities of Brazil are now increasing in number year after year and is even
estimated to reach a high of around 90% by 2050 according to the United Nations
(2014). This will now lead us to the analysis of how the urbanization is related to
the country's economic growth.

The urbanization have always been thought of as unstoppable and inevitable,

while the urbanization-growth nexus is often described as closely associated with
each other--that is according to a research article by Turok and McGranahan
(2013). Brazil, on the other hand, have always been known as one of the
countries with the fastest growing economy in the world, and the number of its
population continues to escalate up to now (Meyer, 2010). This growth eventually
led to the urbanization of Brazil － one of the main contributors to the country's
economic development. It fueled the industrialization of the country and
transformed its living standards. The unexpected speed of urbanization has
strengthened the growth of jobs in cities also because states invested heavily
upon urban infrastructures. And it caused Brazil to achieve a high GDP due to its
productivity growth caused by the city’s population growth. It also removed
barriers in rural-urban mobility which helped enable economic growth, but these
benefits could be enhanced well with some supportive policies and focus it more
to growth contribution, environmental sustainability and poverty reduction (Turok
& McGranahan, 2013). Because of these visible outcomes, people from the rural
towns are enticed to transfer in the hopes of living a more quality life. More
specifically, the reason why Brazilians from rural areas move to urban centers is
because of (1) job opportunities having higher wages which was impossible in
rural areas; (2) quality health care and schools; (3) bad weather conditions
makes life harder in rural areas; and (4) there is more to do and see in big cities
(Meyer, 2010).

The problem with a highly urbanized country, though, is that cities don’t have
the time or resources to accommodate and employ all of the people. So
Brazilians who are migrating arrive to urban centers only to find themselves living
in poor conditions and contribute to the poor population of the country because of
unemployment. They sometimes face discrimination and social inequality given
that 67% of the urban respondents felt that people from rural areas were less
intelligent than urban dwellers, while 80% of them felt that rural people had a
lower moral character according to a survey conducted by the World Bank Group
(2015). Another problem with increasing population is the increase in crime and
violence and the worsening of the environment due to pollution and
contamination (Hutcherson, 2018). Therefore, together with Brazil’s
developments in urbanization and economic growth comes economic
consequences.

Urban versus Rural Population

Graph 8. Rural Population of Brazil (2008-2017)

 16.5 16.25
15.96
16 15.66
In Percentage (%) 15.38
15.5 15.1
15 14.83
14.57
14.5 14.31
14.07
14 13.83

13.5
13
12.5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Rural Population Percentage

Table 1. Rural Population of Brazil (2008-2017)

Year No. of Rural Population Year No. of Rural Population
2008 31,121,025 2013 29,814,380
2009 30,887,069 2014 29,545,483
2010 30,613,421 2015 29,473,178
2011 30,359,197 2016 29,216,758
2012 30,085,995 2017 28,944,569

(Source: Statista)

The graph presented above shows the decreasing percentage of the rural
dwellers with the actual figures below it. During 2008, the number of rural
dwellers accounted to 31 million, but in the year of 2017, it decreased by up to 7%
with only 28 million population. While the urban population continues to increase,
the rural population did the opposite. When both are compared with each other,
then it is no doubt that the urban dwellers are much more higher than those living
in rural areas. While the urban centers made up almost 90% of Brazil’s total GDP,
only 10% are from the rural towns, so this explains very well why Brazil is more
focused on enhancing more the urban areas, such as investing more on
infrastructures and the enhancement of skills of the labor force. So obviously,
majority of the urban dwellers have higher skills and literacy than those living in
rural areas, especially that they have more access to quality schools and health
cares.

Informal Urban Labor Force

Table 2. Informal Employment in Brazil (2009)

Persons in informal employment under Persons in informal employment outside

the non-agricultural sector (As of 2009) the non-agricultural sector (As of 2009)
% Millions % Millions
Total 66.5 51.1 Total 33.5 13.8
Female 66 33.8 Female 76 10.2
Male 34 17.2 Male 24 3.5

(Source: International Labor Office-Dept. of Statistics)

The informal sectors are distinguished as those who are unregulated,

unregistered and illegal or having no legally valid employment contract. A job is
informal when it lacks basic social or legal protections or employment benefits
which could be found in the formal sector, informal sector or households (ILO,
2012). The table above will be helpful in presenting us the information needed
regarding the informal employment in Brazil which is the latest available data as
of now.

In Brazil, social security coverage is one indication of a legally recognized

work (Telles, 2008), but having a business permit or trade license doesn’t qualify
as a registration. According to Fairris & Jonasson (2016), informal sectors in
Brazil comes in different types, from home-based production of commodities to
services or trade. Specific examples of these are those selling street foods,
shoe-shining, washing wind screens, kitchen workers, and the likes. This could
be in a legal or illegal nature—selling goods from small shops to selling drugs on
the street. One consequence of an informal work is that it is more precarious than
formal jobs which offers no insurance or benefits to workers such as maternity
leaves, overtime premiums, social security contributions and pensions. Firms or
individuals who hires informal employees does not keep any documentations
about them which is almost the same as the worker never existed at all.

Some of the factors that drives informal employment are the strict labor
regulations, high costs of labor and the excessive tax burden that is why people
try to evade taxes. Another cause is if a rural migrant arrives at the urban center
and does not qualify the requirements (such as educational attainments or skills)
of the job they are applying for, and if the formal sector doesn’t have enough time
and resources to accommodate these people, then they end up contributing to
the informal sector. According to a survey by the ILO (2012), 21.4% of the total
population under the informal sector are below the national poverty line, which
comprises the poor people, on the other hand, the total percentage of persons in
the informal sector for non-agriculture is about 66.5% or around 51.1 million
which is comprised of 66% or 33.8 million females and 34% or 17.2 million males.
Under the informal sector which is outside the scope of the non-agriculture, the
percentage is about 33.5% or 13.8 million comprised of 76% of females or 10.2
million in figures and 24% or 3.5 million males. If the total percentage of both
males which is 77.4% and the total percentage of both females which is 91.8%
are compared with each other, then it could be clearly seen that there are more
women laborers in Brazil’s informal sector than males. The reason is because of
the formal sector’s inability to create enough opportunities for women entering the
labor markets which forces women to enter the informal sector. This is also
because of an increase in women’s need to augment to familial income due to
declining male wages in the country and an increasing participation of women to
society (Nimrichter, 2007). Now it could be clearly understood why there is an
increasing percentage of women in informal sector than men. In terms of GDP, a
study by Filho (2012) stated that at least 17% of Brazilian GDP were contributed
by its informal sectors.
Urban Unemployment

Graph 9. Urban Unemployment in Brazil (2008-2017)

16
14
12
In Percentage

10
8
6
4
2
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Unemployment Rate 7.63 8.28 7.26 6.69 7.19 6.9 6.67 8.44 11.61 13.32
Female Unemployment Rate 12.5 11.12 11.19 9.17 9.08 8.79 8.14 10.11 13.54 15.08
Male Unemployment Rate 7.18 6.15 6.26 4.88 5.8 5.67 5.58 7.19 10.16 11.23

Average Unemployment Rate Female Unemployment Rate Male Unemployment Rate

(Source: The Global Economy)

The graph above helps us determine the average unemployment rate of

Brazil from the year 2008-2017. Looking at the graph above shows us that
unemployment in the country is increasing basically due to some factors or
consequences affecting the society together with the developments that are
happening. The unemployment rate is defined as the number of unemployed
people but are seeking for employment as percent of the labor force based on the
economically active population (Global Economy, 2017). Unemployment in Brazil
seemed to decrease between the years 2008-2014 but grew significantly until
2017. It had the highest rate of unemployment during April of 2017 with a rate of
13.6% and the lowest rate of 6.2% during the month of December, 2013. During
2008, the average unemployment rate was 7.63% which was comprised of 7.18%
or approximately 1,057,363 males and 12.5% or 1,767,108 females based on the
population for that year. On 2017, the percentage rose to 13.32% which is
comprised of 15.08% of females or around 4 million and 11.23% of males which
is more than 3 million based on a given data during that year. On average, female
unemployment always tend to be higher than male. This is because according to
Bruschini (2007), Brazilians continue to perceive the notion of female
responsibility for household chores and for child and family care which indicates
their traditional family models. So instead of working, the main activity of women
in Brazil is to perform "household tasks" which are considered as economically
inactive, together with students, pensioners, disabled or those living on their
equity. And this explains why women are more likely unemployed than men.

Talking about unemployment as a whole, the reason for this is when rural
inhabitants transfer to urban centers and they can't find opportunities in the
formal sector, then chances are they get employed to informal sector or they end
up having no jobs at all or unemployed. Brazil also has a very high population
which is one of the major cause of unemployment problems in its country which is
why cities don't have ample time and resources to employ these people. Another
claim by the Economy Watch (2010), is that it is also caused by a number of
factors such as not meeting the skills and qualities required by the employer who
prefers more to those who have attained higher educational degrees, having
restrictive labor laws which are rigid and inflexible and as per reports of the IBGE
(Instituto Brasiliero de Geografia e Estatística), this increase is caused by
seasonal effects which is because of holidays when many people are hired in
metropolitan areas, they also lose their jobs when holiday seasons are over since
these jobs are not permanent. Lastly, the unemployment rates may be slower to
fall, as more and more young people enter the labor force in Brazil (Hodgson,
2007).
Policies

Brazil for the past years have been striving to achieve improvements in its
economy by lessening economic problems through policies which were adjusted
and made even better to meet the changes that are taking place within their
economy. According to a report by the ILO (2014), Brazil have implemented
policies which increased its formal employment by almost 14 percent in a decade.
This policy is termed as “SUPERSIMPLES”—a Government program which aims
to reduce taxes for small businesses and simplify regulations. Since it was
published in July 2007, 9 million businesses have now joined this system of
taxation and have turned these businesses from being a part of the informal
sector to being one of the formal sectors. The tax burden of the businesses have
now been reduced by 40 percent since this so called “innovative taxation system”
brings eight different taxes into a single one, thus reducing the average tax
burden of companies. It strengthened formal economy, created more jobs and
social protection for both workers and employers.

This also reduced the red tape in Brazil since the only requirement for
businesses now is a proof of a registered production site. Another factor that
caused a decline in mean informality rates over this time are the increasing rates
of labor law enforcement, rising education levels, and changes in industry
composition, which explained between 16 percent and 57 percent of the mean
decline in informality over the period. Specifically, this reduced the percentage of
female and male in informal employment by 18 percent and 13 percent
respectively as of 2012. Therefore, in order to reduce labor informality and
unemployment, then the government should continue investing resources to
increase educational composition such as increasing high school enrolment and
reduce drop outs.

The Brazilian Government have also imposed microcredit schemes in

which credit was made available through the official banks to promote local
agricultural production which gives livelihood opportunities to those Brazilians
who are unemployed (Bruha, 2014). The Government also encouraged more
investors for more job creations which is responsible for the decline in urban
unemployment from 12.3% in 2003 to 9.5% in July 2007. The main contributor to
this is the service sector growth which played a major role in decreasing the
unemployment rate of the country. It specifically reduced unemployment by
almost 20% in women and 18% in male as of October 2009 (Economy Watch,
2010).

Also, those who are unemployed because of retirement or being removed

from position are being given unemployment insurance such as FGTS (Fundo de
Garantia por Tempo de Servico) and Aviso Previo. The purpose of these
resources is to support employees when they are dismissed from their jobs. And
in 2008, 6.7 million workers have already received unemployment insurance
benefits, of whom two-thirds were men and one-third were women (Novais, 2012).
Most importantly, the Brazilian Government have also established Policies for
Women which is included in their National Plan of 2010 to empower women
especially when it comes to labor force (Vieira, 2010).
 CHAPTER IV

THE ENVIRONMENT AND DEVELOPMENT

Brazil occupies nearly half of South America, specifically 8.5 square

kilometers that includes areas of climatic zones with a wide variety of different
species, plants and ecosystems. The country also has a marine coast of 3.5
million square kilometers. Basically, Brazil is recognized to have the largest
biodiversity in the world.

An environmental policy can be defined as a course of action, plan or rule

decided by a government intended to address issues concerning a country’s
environment. The first government action made by Brazil to preserve their forests
was the construction of national parks, right after sustainable practices in the
country was initiated in the 1930s. In 1934, the first Brazilian Code was made in
order to regulate the use of lands in Brazil. During mid-century, actions taken on
environmental issues stopped progressing due to the industrial expansion in the
country. Brazil holds one of the world’s richest biodiversity spots and its stagnant
progress became a global concern. Environmental measures were implemented
in the 1960s, such as the Permanent Protection Areas (APPs). In 1972, the
government took direct actions with a goal in mind to achieve a better and
sustainable environment.

The Brazilian Forest Code 2012

The deforestation in the Amazon draws the most international attention.

Deforestation refers to the clearing of forested land either for agricultural
purposes or for logging and for use as firewood. Approximately 2000 square
kilometers of natural vegetation areas in Brazil are deforested each year due to
logging and fire. This actually entails various problems, such as loss of
biodiversity, pollution, soil erosion, climate change and others.

The New Forest Code in Brazil is a policy on land management that requires
farmers or landowners in the Brazilian Amazon to maintain 50% of the land
permanently as forests or legal reserves. It was first implemented in 1965 with
little change on the issue on deforestation and was revised in 2012. According to
an article by Maria Izabel Martinez da Matta published in www.earthday.org., it
mainly served agribusiness measures such as giving amnesties to illegal
deforestation prior to year 2008, which reduced areas that should have been
maintained permanently as forests from 500,000 to 210,000 square kilometers
and this should seen as a big win for the agribusiness interests, says lead author
Bitaldo Soares-Filho of the Federal University of Minas Gerais (UFMG). As a
result of the revision, the area that could be deforested equates to 79 million
hectares, an area the same as the size of Chile (IPEA).
 However, according to a guide entitled Brazil’s new Forest Code: A guide for
decision-makers in supply chains and governments, “Brazil’s New Forest Code
(Law no. 12.651) has been in force since 2012. This code introduced new
instruments that, once effectively implemented, allow for better monitoring of land
use which will be crucial against the combat against deforestation and in ensuring
environmental compliance, as well as attaining Brazil’s goals with respect to the
reduction of greenhouse gas emissions.” Though the policy still lacks
implementation, the Brazilian government has done a good job since its revision.
Along with the revision came new legal instruments meant to lead to a better
environmental management and land use in the country, including reforestation
and others, such as the creation of the online registry system where landowners
can register their property boundaries and environmental information. Recent
studies show that this registration program, now known as Cadastro Ambiental
Rural (CAR), slows the deforestation in Brazil. CAR includes improved satellite
monitoring, increased enforcement of the 2012 Forest Code, private-sector zero
deforestation and credit restrictions towards excessive deforestation. Through
this program, the Brazilian government is able to control deforestation in the
Amazon more effectively. Forests are effectively protected － mitigating climate
change and preserving Brazil’s biodiversity.

The International Institute for Applied Systems Analysis published an article

on July 10, 2018, that shows data on how the Forest Code can balance the needs
of agriculture and environment. The Forest Code seems to be restrictive on
agriculture, however, the study proves that it will not prevent growth in the
Brazilian agriculture, if fully implemented. Its full implementation means
preventing the loss of 53.4 million hectares of natural vegetation across the
country and will result to an obligatory restoration of 12.9 million hectares of
forest under the Forest Code. The main message of the research is that though
the Forest Code is far from perfect, it could actually bring a compromise between
agriculture and environment (Soterroni, 2018).
Low-Carbon Agriculture Program

Basically, the Low-Carbon Agriculture (ABC) Program is under the

Low-Carbon Agriculture Plan instituted in 2010, and is for reducing greenhouse
gas emissions in agriculture. The ABC plans has the following objectives: (1) to
promote the recovery of the 15 million of the current 60 million hectares of
degraded pastures; (2) to promote systems of crop-livestock-forestry integration
of 4 million hectares; (3) to increase the practice of non-till planting on 8 million; (4)
to increase the use of the technique of biological nitrogen fixation on an additional
5.5 million hectares; (5) to plant 3 million hectares with planted forests; and (6) to
promote the treatment of animal wastes (Low-Carbon Agriculture in Brazil: The
Environmental and Trade Impact of Current Farm Policies, 2014). The Brazilian
government has been increasingly investing in agricultural infrastructure and
research during the recent years. Furthermore, the country’s agricultural sector
has been relevantly significant to its economic growth. Agriculture actually
accounted for one third of the 50% increase of Brazil’s GHG emission, from 1994
to 2005 (Marcelo, 2014). With this challenge, Brazil made a series of efforts to
control GHG emissions and is one of the countries to volunteer in reducing
emissions during the 15th United Nations Framework Convention on Climate
Change (UNFCC) Conference of Parties in 2009. During the same year, the
government instituted the ABC plan, that is made up of concrete plans and
actions in order to reduce or avoid GHG emissions and attached ABC Program to
its framework. The said program provides low-interest loans to farmers to
encourage sustainable agricultural practices. Brazil’s goal is the reduction of
GHG emissions by 160 million tonnes of carbon dioxide equivalent annually by
2020.

The financing system of the ABC Program has allowed considerable

expansion of farmland available for food production. Despite its slow initial uptake,
the program has already launched over 2,000 projects in 2011 to 2012, according
to Climate Change, Agriculture and Food Security (CCFAS). The plan does not
only benefit Brazil, the major and global sources of sugarcane, soybeans, beef,
coffee, rice and more, but it also saves the entire planet. As a country centered
on agriculture, it is absolutely crucial for Brazil to extend efforts in ensuring the
productivity of the said sector while reducing its consequences and to realize the
urgency of mitigating the effects of climate change.

National Water Resources Policy (NWRP)

In 1997, the National Resources Management Act was enacted, along with it
the National Water Resources Policy and the National Resources Management
System were established. It was proposed to achieve (1) sustainability －to
ensure that the present and future generations have an adequate availability of
water with suitable quality; (2) integrated management － to ensure the
integration among uses in order to guarantee continuing development; and (3)
safety －to prevent and protect against critical events, due to either natural
causes of inappropriate uses. The specific tools outlined in the Act to implement
the policy include (1) water resources plans; (2) classification of water bodies for
different use, resulting water quality standards tailored to the target use of each
water body; (3) a permit system for withdrawal or use of water; (4) water pricing;
and (5) a water resources information (Porto and Kelman).

Water is a resource of primary importance, and therefore needs the proper

management. Brazil is a large country with a vast water supply, known to have
the highest total renewable fresh water supply, approximately 12% of the total
surface water of the earth (ANA, 2007). Shown on the table below, the largest
part of surface water is in the northern part of the country, where a only a minor
part of the population is located.

Table 3. Distribution of water in the regions of the country with their respective population
in percentage

Region Resource (%) Population (%)

 North 68.50 6.98

Center and West 15.70 6.41

South 6.50 15.05

Southeast 6.00 42.65

Northwest 3.30 28.91

(Source: SEMARH, 2003)

Until now, an initial analysis shows the success of the Act along with the
challenges that rise from the implementation process. However, the National
Water Resources Policy still plays a big role in enforcing efficient water use and
contributing to the development of the country’s civilization. It emphasized the
need for integrated management, adaptability towards regional diversity,
coordination among a variety of sectors, proper land use planning and integration
between inland and coastal water management. The principles under the policy is
now seen to be the embodiment of modern water management. They intend to
reach sustainability that bring about the protection of the environment, economic
development and social improvement.
 CHAPTER V

BALANCE OF PAYMENTS AND DEBT CONDITION

Current Account

Graph 10. Brazil’s Current Account

20000
2000
0
2001
-20000 2002
US$ million

-40000 2003
2004
-60000
2005
-80000 2006
-100000 2007
2008
-120000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2009
2010
Year

(Source: World Bank)

Brazil’s current account deficit is the result of continuously expanding of

service that has been offered by Brazil. Also, the participation of households or
workforce of Brazil to the other country result to deficit of primary income which
also lead to deficit of current account. As we can see in the year 2002 until 2006,
the inflow of current account is increasing this is because of the increasing
amount of exported products which a total of 23,749 (million) in the year 2003. In
almost double the amount of the exported products in the year 2002 which costs
at 12,049 (million). Since in the year 2003, the amount of the exported product
are continuously increasing until in the year 2006, in which the total exported
product in that year is amounted 45,119 (million), while the imported services are
just about the same in the year 2002 until 2004 which it average -4619 (million).
But in the year 2005 to 2014 the outflow of money in balance of services has
been increased which amounted -7 883 (million) and -48 107(million) respectively,
which also means that imported services is increasing surprisingly. In addition,
the balance of goods is decreasing from the year 2005 until the year 2014
amounted 43 425 (million) and -6 629 (million) respectively. This situation causes
the current account become deficit.

Capital Account

Graph 11. Brazil’s Capital Account

500
2000
400
2001
300
2002
200
US $ million

2003
100 2004
0 2005
-100 2006

-200 2007
2008
-300
2009
2010
Year

(Source: World Bank)

 There are a lot of professional players in Brazil especially on football that
makes foreign investor encourage to invest their money to the players which is
also known as third party ownership. Third party ownership is a form of
investment in which the third party investor will shoulder the fees in training and
accommodation of a certain player or a team, in the other words, the third party
investor will function as a manager of a certain player or team. In return, as long
as the player or teams gain profit, the third party investor will have a share. This
situation will make the capital account of Brazil positive in the sense that there is
inflow of money from the foreign investor. As we can see in the table that in the
year 2004 it went negative, it is the results of massive people went to USA and
live there permanently. Moreover, it is also the effect of huge amount of natural
resources sold to China. Since then, the capital account went to positive until in
2015 it also doubled the amount in its prior year. This because of there is a lot of
third party investor who funded the training and accommodation of the Brazil’s
national football team for the upcoming 2016 Summer Olympics which will be
held in the said country.

Financial Account

Graph 12. Brazil’s Financial Account

20000
2000
0 2001
-20000 2002
US$ million

-40000 2003
2004
-60000
2005
-80000
2006
-100000 2007
-120000 2008
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2009
Year 2010
 (Source: World Bank)

This table shows that Brazil is buying stocks or bonds in the other country
that makes their financial account goes negative. On the other hand, we can see
that in the year 2002 and the 4 succeeding years, the amount of investment of
Brazil to the other country has been lessen and the foreign investor in Brazil has
been increased and it makes financial account goes up or become positive. Ever
since, the direct and portfolio investment of Brazil to the other country has been
increase which consequence is a large amount of money coming out from Brazil.

Debt Condition

Graph 13. Brazil’s Debt Condition

1800000

1600000

1400000

1200000

1000000

800000 Debt
600000

400000

200000

(Source: World Bank)

 This table shows that in the past few years the debt of Brazil is rapidly
increasing since in the year 2004 until the present time. The deficit in financial
account and current account in balance of payment is directly proportional with
the arising debt because this shows that payments for debt have not been
catered and the government of Brazil is focusing on investment. As the time
passes by, the us dollar rate went up as a result the debt of Brazil in terms of us
dollars goes up as well.

Policies

Law No. 12,715

The main purpose in this law is to lure more investment and controversy that
can possibly result to loss of government profit. This law is also established to
avoid deceive tax authorities and manipulation of markets. In terms of import, the
law no. 12,715 is primarily related to:

 Minimum requirement for the application of the Brazilian uncontrolled price

method (PIC) using internal comparables
 Minimum statutory gross profit margins from 20% to 40%, depending on
the company’s industry, required for the Resale Price Method (PRL)
 Intercompany price to be tested under PRL method

On the other hand, in terms of export, the law no. 12,715 is primary related to:

 Changes to safe harbor conditions by increasing the profitability safe

harbor to 10% and introducing a new threshold

Law No. 4,131

It is a primary legislation law regarding foreign capital. According to Banco

Central Do Brasil (2015) law no. 4,131 defines foreign capital as any goods,
machinery and equipment that enters Brazil intended for the production of goods
and services, as well as any inflow of funds to be used in economic activities,
belonging, in both cases, to non residents. As stated in this law that foreign capital
that are invested in Brazil must be converted into local currency. This law assure
that all foreign capital investments are treated equally.

Resolution 4,373

This resolution is revising the regulation for investments by non-residents of

brazil in portfolio investment and etc. The main purpose of this resolution is the
with law no. 12,715 which is luring more foreign investment. In addition, this
resolution also reduces the procedure in investing and reducing also the cost by:

 simplification of procedures,
 optimization of data filing and
 compilation of the guidelines applicable to non-residents on their portfolio
investments in a single instrument.

CHAPTER VI

INFLATION, INTEREST RATES (CENTRAL BANK) IN RELATION TO

MONETARY SITUATION

At the point when prices rise for energy, food, commodities, and different
products and services, the whole economy is affected. The rise of prices, known
as inflation, affect the average cost for basic items, the expense of working
together, acquiring cash, contracts, corporate and government security yields,
and each other aspect of the economy.

According to Milton Fredman, inflation is always present and is

everywhere. It is a normal phenomenon. Inflation is a complex social happening
which has many causes and determinants that change in a period of time.

Brazil’s economy is one of the world's ninth largest economy by nominal

GDP and the eighth largest by its purchasing power. For that the economy has
ups and downs for the past years.

Graph 14. Brazil’s Inflation Rate and Target

12.00%

10.00%

8.00%

6.00% INFLATION RATE

Target(%)

4.00%

2.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source: Trading Economics)

Based on the data given by the Brazilian Institute of Geography and Statistics,
the inflation rate decreased from 5.90% in 2008 to 4.31% in 2009. It is the second
of the lowest rate that happened during the 10 year interval. And by the year 2010,
it shows the 5.91% inflation rate, which then increases by 6.50% by the year
2011. The following year decreases by 5.84% and 5.91% by the year 2012 and
2013 respectively. Succeeded by a rate of 6.41% in year 2014, and then
increased to 10.67% by the year 2015, which is one of the highest inflation rates
during the 10 year interval. The inflation was then controlled by year 2016 and
2017 with the rate of 6.29% and 2.95%, in which the 2017 inflation rate was one
of the lowest levels in 19 years according to the Brazilian Institute of Geography
and Statistics (IBGE). Also a 4.5% inflation target is shown consistently in the
following years from 2008-2017.

Inflation targeting is an approach set by the central bank to the monetary

policy that involves the use of public announcing to the people. It serves as the
guide for the public expectations about the future inflation, allowing them to plan
for a greater certainty.

The level of inflation in year 2008 was 5.90% because of the negative current
account amounting to -30,640 in part of the nation’s services amounting -16,861,
and primary income -41,806. That causes a negative balance of payments
affecting a high inflation rate. In year 2009, the inflation went down to 4.91%
because the current account went up from -30,640 to -26,261, affecting a change
in inflation to become lower compared to the year 2008. In year 2010 and 2011,
the inflation went up because of the effect in services and primary income in the
current account to increase more its negative account. Similar to year 2008. After
the year 2011, the inflation decreases at year 2012, then slowly increasing in
following years until 2015 it reaches the highest inflation rating of the 10 year
interval.

The 2015 inflation went up when the country was in the hands of presidency
of Dilma Rousseff in the year 2011. According to Kimberly Amadeo(2018), a U.S.
Economy expert for The Balance. Dilma Rousseff increased public spending.
She raised the minimum wage and forced the state-run banks to lend more. At
the same time, the central bank lowered the discount rate from 11.5 percent to
7.25 percent. That causes inflation to go up, in which Rousseff aggravated by
cutting sales taxes and lowering prices on food, gasoline, and bus fares.

State owned-oil company were affected by the price controls. Petrobras, a

Brazilian multinational corporation in the petroleum industry, unfairly competed
against the Brazil’s successful ethanol production. Other than that business
leaders curtailed investments in such government scenario. It also worsens in
2015, because oil is the primary export of the country and prices of the oil fell as
the dollar strengthened. Some of the companies in Brazil cut off jobs and
production. Causing the weak currency of money to raise prices of imports and
increased inflation.

In year 2016, Michel Temer became the president of Brazil after the
impeachment of Dilma Rousseff. The current account of the economy increases
causing a change of the inflow of money, cash reserves, borrowing of money in
other countries, and debt-service. Until 2017, the country recovered and reaches
below the inflation target. According to Sao Paulo(2017), the growth of GDP of
the country and the successful leadership causes the nation to recover.

The economy of Brazil is slowly recovering after contracting the 10.67%

inflation rate in 2015, the worst performance in 25 years. With that scenario, the
economy then recovered by the year 2017, which is one of the lowest levels
during the last 19 years, with 2.95% of inflation rate.

Interest Rates

An interest rate is the percent of principal charged by the lender for the
utilization or use of its money. The amount of money lent is called the principle.
With that, the money that they borrow from the person will be paid with interest
rate in deposits.

To control inflation, the national bank increases the interest rates. As

interest rate rises, the cost of borrowing rises. Causing borrowing of money to
be more expensive.

When borrowing of money will become less and so the amount of money
to be circulated will fall. A fall of the money supply will cause the people to spend
less on goods and services. That will lead to fall in the demand for goods and
services. With the supply remaining constant and the demand for goods and
services declining; the price of goods and services will fall.

One way to understand more the inflation and interest rate is by the
monetary policy of the bank, where the central bank sets a specific inflation rate
as its goal is called the inflation targeting. It is done in order for the people to
believe that prices will continue rising. It convinces the economy by making them
purchase things now before they cost more.

Graph 15. Interest Rates in Brazil (2008-2017)

16

14

12

10

8 INTEREST RATES IN
BRAZIL (2008-2017)
6

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source: Trading Economics)

The figure above shows the interest rates from year 2008 to 2017. Based on
the data given by the Banco Central do Brasil, the interest rate went down from
13.75% in 2008 to 8.75% in 2009. And by the year 2010, it shows the 10.75%
interest rate, which then increases to 11% by the year 2011. The following year
decreases by 7.25% and 10% by the year 2012 and 2013 respectively.
Succeeded by a rate of 11.75% in year 2014, and then increased to 14.25% by
the year 2015. The interest then went down to 13.75% in year 2016 until it
reaches its lowest point at the year 2017 at 7% interest rate.

The interest rate in year 2008 was 13.75% because it reaches beyond the
inflation target of 5.90% in the year-end inflation. That makes the central to
increase its interest rate in that year. As inflation decreases at the year 2009, the
central bank also decreases its interest rate of 8.75% because the year-end
inflation reaches below the inflation target. Then the interest rate increases by the
year 2010 and 2011 with 10.75% and 11% respectively, for the Brazil’s inflation
reaches beyond the inflation target of 4.5%. Followed by an increasing interest
rate of the year 2012, 2013, and 2014 with 7.25%, 10%, and 11.75% interest rate
respectively. The interest rate increases because also of the economic
happening in these years. The inflation then reaches beyond the target inflation
causing the central bank to increase its interest rate for their monetary policy.
Until it reaches the highest interest rate of the 10 year interval of 14.25% in the
year 2015, also caused by the lapses of the inflation in the target inflation point.
Then it slowly decreases by the year 2016 after the presidency of Michel Temer,
until 2017 the actual inflation reaches 2.95% below the target inflation of 4.5%.
That makes the central bank to lower its interest rate for the year-end
achievement.
 CHAPTER VII

BASIC INDICATORS OF DEVELOPMENT

Real Income

Graph 16. GNI and GDP per capita of Brazil (PPP: 2008-2017)
$14,000.00

$12,000.00

$10,000.00
Current USD

$8,000.00

$6,000.00

$4,000.00

$2,000.00

$0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP Per Capita 10,656.9 10,538.8 11,224.2 11,560.4 11,673.8 11,915.4 11,870.1 11,351.6 10,868.7 10,888.9
GNI Per Capita 8,929.32 8,956.17 9,380.46 9,866.87 10,459.7 10,829.5 10,932.8 10,594.8 10,326.4 10,366.1

GDP Per Capita GNI Per Capita

(Source: World Bank & Trading Economics)

 The graph above is about the GNI and GDP per capita of Brazil by
purchasing power parity which shows us how Brazil’s economy have been doing
for the years 2008 to 2017. Brazil’s GDP for ten years is almost the same which
was $10,656.9 in 2008 and $10,888.9 during 2017 with little changes and
increases between 2010 and 2015. The GDP per capita in Brazil is equivalent to
86 percent of the world's average according to the Trading Economics. The
Brazilian GDP per capita averaged to $7808 from 1960 until 2017, reaching an
all-time high of $11,915.40 in 2013 and a record low of $3,425.40 in 1960.

On the other hand, Brazil’s GNI increased within the ten years which was
$8,929.32 in 2008 and $10,366.1 in 2017 with continuous increase every year.
The Gross National Income in Brazil averaged 895,321 BRL Million from 2000
until 2018, reaching an all-time high of 1,672,449.67 BRL Million in the second
quarter of 2018 and a record low of 271,187.46 BRL Million in the first quarter of
2000. The income of Brazil relates to the overall health of its economy and
together with the growth of the economy, opportunities for employment and
income also grow. As what can be seen from graph, Brazil has a high GDP and
GNI per capita which could be classified as an “upper middle income country”
based on its GNI per capita which is between $4,086 to $12,615 according to the
classification of the World Bank in 2013. This means that the country has
stronger labor markets and higher income levels which will be able to help those
families living in poverty move above the poverty threshold through income
transfers and increase their health and literacy to ensure a high return on human
investment in the future (Grunewald, 2006).

Health

Graph 17. Life expectancy at birth of male and female (Brazil: 2000-2017)
 90

75

60

45

30

15

0
2000 2005 2010 2011 2012 2013 2014 2015 2016 2017
Male 66.3 68.3 70.1 70.5 70.8 71.1 71.4 71.6 71.9 72.1
Female 74 75.9 77.6 77.9 78.2 78.5 78.7 78.9 79.1 79.3

Table 4. Current Health Expenditure

Current health expenditure (% of GDP)

(2000-2015)

Year 2000 2005 2010 2011 2012 2013 2014 2015

% of GDP 8.4 8.0 8.0 7.8 7.8 8.0 8.4 8.9

(Source: www.brazil.org)
 Presented above are the graph and table of the life expectancy at birth of
both male and female for the past years and the health expenditure of Brazil
based on all available data gathered. It can be clearly pointed out from the graph
above that Brazil has an increasing average life expectancy and has a relatively
high spending on health care. Brazil’s health care is one of the country’s
strongest attributes and spends not just on children, but also on their elderly
person through health insurances especially among the poor. They envision to
provide a “health for all” system by ensuring affordable and quality health care and
enough health care facilities for all such as hospitals and equipments. These will
help prevent diseases, sickness, and injuries which also increases not just the life
expectancy, but also the productivity of the working population in Brazil (World
Health Organization). The program Bolsa Familia also contributes to the health of
poor families since the government is able to monitor the percentage of families
who are keeping their kids vaccinated and sending them for regular health checks.

These three factors are part of the indicators of Brazil’s overall economic and
human development, and it shows that these factors and the economic growth of
Brazil has a positive relationship with each other and that an increase on health
and educational spending makes it possible to result to a higher return on human
investment. One proof of this is Brazil’s human development index which ranks
79th in the world as of 2018 which is 0.759 and is also the highest HDI of Brazil
categorized under the “High Human Development”, while the lowest was 0.610
during 1990 (Human Development Reports).

Education

Graph 18. Mean years of schooling by male and female (Brazil: 2000-2017)
 9

6
In Percentage

0
2000 2005 2010 2011 2012 2013 2014 2015 2016 2017
Male 5.6 6 6.7 6.9 7.1 7.1 7.2 7.3 7.5 7.7
Female 6 6.2 7 7.2 7.5 7.5 7.7 7.8 7.9 8

Table 5. Government Expenditure on Education (2000-2014)

Government expenditure on education (% of GDP)

Year 2000 2005 2010 2011 2012 2013 2014

% of GDP 3.9 4.5 5.6 5.7 5.9 5.8 5.9

(Source: www.brazil.org)

The figures on the graph and table above are based on the latest available
data gathered. It shows us the increasing mean years of schooling by both male
and female as the Brazilian government increased their spending on education.
An increase to 66% of the country’s spending on public education caused an
increase of 72% on the mean years of schooling of male and 75% on female, in
addition, as of 2017, the expected years of schooling in Brazil is 15.4. This is due
to their strengthening of policies on primary education such as approving National
Educational Plans to increase the education levels and literacy of the people to
be able to produce a stronger labor force with the skills needed in the future (The
Economist, 2012). The government of Brazil regulates the country’s educational
system through the Ministry of Education. They provide funds and educational
guidelines to each area of Brazil, and each state are responsible for enforcing
and implementing these policies to increase the quality of education in Brazil
(Brazil Education). They also ensure that children belonging to the poor sector
are able to attend school through their Bolsa Familia program which transfers
income to the poor under the condition that they send their kids to school
regularly (ISPI, 2012). The government of Brazil regularly monitors these families
and it has now reached 40 percent of the poorest population of Brazil and has
continued to increase due to the aim of their government on 100 percent
concentration of the program to poor families living in Brazil (World Bank, 2010).

Holistic Measures of Living Levels and Capabilities

The economic and social progress of Brazil between year 2003 and 2014
lifted over 29 million people out of poverty and those who were experiencing
inequality dropped significantly. Raising levels of productivity and
competitiveness is a very crucial challenge for Brazil in order to attain higher
growth.

Health

In terms of health, there were numerous programs and initiatives supported

by the bank that increased the access to health services for those in need. For
example, the Sector Wide Approach (SWAP) for Parana Multi-Sector
Development Project, a program which aims to enhance the “maternal and child”
and “emergency” healthcare networks. Implementing this kind of program
resulted in the reduction of Maternal Mortality Ratio (MMR), it decreased from
63.8% in 2010 to 37.5% in 2015. Aside from this achievement, this program also
made a significant indirect achievements by increasing the number of neonatal
intensive care beds from 268 to 1714.

Another example is the “Rio Grande do Norte:Regional Development and

Governance Project” gives special attention to maternal and child healthcare
which improved healthcare services for women and children by increasing the
number of Maternities and beds for newborns, improving the capacity of
diagnosis for many diseases by building new hospitals and laboratories.

Another program is the Integrated Health and Water Management, which

aims to provide a set of multi-sectoral interventions to the people of 10
municipalities. It also aims to increased access to clean water and sanitation in
different municipalities.

Education

In terms of education, rates of upper secondary educational attainment for

adults and cognitive skills at age of 15 for students are below average in OECD
target. However, there are some programs of Brazil that can help in order to lift
the rate of literacy. For example, Bolsa Familia, a conditional cash benefit
program which targets the poorest families living in Brazil. It provides small
conditional cash transfers to poorer families, the payments are conditional on
families sending their children to school to at least complete basic education. It
reached more than a quarter of Brazil’s population.

Agriculture

In terms of Agriculture, mostly of their programs focuses on providing

assistance in the livelihoods of poor families, especially farmers. Innovative
projects empower local communities in the poor regions of Brazil to invest and
improved technologies. The improved technologies will be used in production of
agricultural products and bring their products to the market. For example, the
Santa Catarina Rural Program, a program which helped in the strengthening and
extending rural services and adopt practices that will intensify production without
sacrificing the environment.

Environment
In terms of environment, Brazil has improved its environmental policies in recent
years. Some initiatives were implemented to combat climate change which has
led to emission reduction. For example, the Amazon Region Protected Areas
(ARPA), a program which aims to prevent the emission of 430 million tons of
carbon by 2030 in a 60 million hectares of protected areas.

Human Development Index

The HDI value of Brazil for year 2017 is 0.759, which is considered to be
part of the high human development category—positioning it at 79 out of 189
countries and territories. The HDI value of Brazil between year 1990 and 2017
increased from 0.611 to 0.759.

Table 6 shows the progress of each HDI indicators. Between year 1990 and
2007, the life expectancy at birth in Brazil increased from 65.3 to 75.7, which is
above the average of the partner countries but below 4.3 years of the OECD
average which is 80 years.

Mean years of schooling increased by 4.0 years and expected years of

schooling also increased by 3.2 years. The GNI per capita of Brazil increased by
about 3,058 between year 1990 and 2017. As the Human Development Index
indicators increased, the Human Development Index value also increased.

Table 6. Brazil’s Human Development Index and its indicators

Life Expected Mean GNI per HDI value

expectancy years of years of capita
at birth schooling schooling (2011
PPP$)

1990 65.3 12.2 3.8 10,697 0.611

 1995 67.6 13.3 4.6 11,097 0.648

2000 70.1 14.3 5.6 11,197 0.684

2005 72.0 13.8 6.3 12,041 0.700

2010 73.8 14.0 6.9 14,112 0.727

2015 75.3 15.4 7.6 14,350 0.757

2016 75.5 15.4 7.8 13,730 0.758

2017 75.7 15.4 7.8 13,755 0.759

Characteristics of the Developing World

Brazil is being termed as one of the emerging economies which was included
in the BRICs (Brazil, Russia, India and China). They are included in the upper
middle income country with increasing GDP and GNI and has a high human
development index. They have also established policies to help enhance their
education and health and have done so many changes in their government to
somehow manage the current economic challenges their country is facing.
However, despite of all the economic growth and developments taking place in
their economy, Brazil is still categorized as a developing country and not a
developed one.

Though it has several characteristics of a developed country, including the

largest economic growth in South America, Brazil is still considered a developing
country since it has more characteristics of a developing nation than a developed
one. More specifically, these are the reasons why Brazil up to now is still
considered a developing country:
1.) Due to its low levels of living or GDP per capita. As of 2016, Brazil’s GDP is
1.775 trillion, while its GDP per capita is $10,868.7. Although it is high for a
developing country, this amount is still low when compared to the $12,000
threshold needed for classification as a developed country. An example to this
is Australia’s GDP per capita as of 2016 which is $49,144. When we compare
this with Brazil’s GDP, then it is no doubt that Brazil is far from being classified
as a developed country (World Bank).

2.) Having a high infant mortality rate. Still as of 2016, Brazil has a high population
of 209.4 million and a high birth rate, at 15.2 births per 1,000 people which is
another characteristic of a developing nation while in Denmark on the same
year is only 7.6 births. In addition to a high birth rate, the death rate of Brazil is
also high. Several factors which contribute to this includes the lack of clean
water; limited access to adequate health care, more specifically in rural areas;
poor housing conditions in many regions of the country; and substandard
diets..

3.) Its life expectancy which is 74 years, ranks higher than that of most developing
countries, however, it is still low when compared to 80, which is the average life
expectancy for developed nations. Once again, this is the cause of lack of
quality health care which prevents many citizens from living a long life and
growing into old age when in fact, these are the years when quality health
services are needed the most (Investopedia, 2016).

Other indicators as to why Brazil continues to be a developing country is

because of its strictly implemented labor laws, which makes hiring and dismissing
of employees expensive and extremely difficult; its corruption levels, crime levels
which forces a business to allocate extra budget for security and its lack of
infrastructures such as better railroads and roads which makes it hard for them to
transport agricultural products from agricultural lands to potential markets. In
addition, Brazil is also dependent on their international relations, especially to
China which is their biggest investor since it absorbs 6.7% of their exports
(Geromel, 2011). The reason why Brazil is still considered a developing country is
because of its long list of inherited problems which drags its economy down
despite of being termed as an emerging economy. So as long as their country
keeps on inheriting these problems, Brazil will always be categorized as a
developing country (Yokomizo, 2017).

General Conclusion

As one of the countries which shows the worst patterns of income distribution
in the world, Latin America’s largest country is now rising in the ranks,
experiencing high growths and investment rates － leading to multiple
developments and economic transformations. Poverty level was reduced and the
country underwent structural changes that increased the equality of their income
distribution. Data shows that more than 40 million people were able to improve
their standards of living in the last decade, reclassifying Brazil as a “middle class”
country. This also means that Brazil has stronger labor markets and higher
income levels which could help those families living in poverty move above the
poverty threshold through income transfers.
 Both of the country’s birth rate per 1,000 people and death rate per 1,000
fluctuated every single year from 1980 to 2000. The birth rate has fallen due to a
number of factors quite complex and include a mixture of (1) urbanization,
industrialization and growth of services; (2) an increase of female labor; (3) less
need for children; (4) less pressure in women to have children; (5) a falling death
rate, which means replacement births are less needed. A decline in mortality rate
occur every year due to expanding public health system, urbanization, and
sanitation. Brazil’s population policies has two focuses: the distribution of
population and uplifting a portion of the population’s low standards of living.

Brazil is known to be one of the countries with the fastest growing econony in
the whole world. As discussed in Chapter 3 in this paper, the population living
within the cities of Brazil are now increasing in number year after year and is even
estimated to reach a high of around 90% by 2050 according to the United Nations
(2014). The increasing population of Brazil led to its urbanization, which in turn
led to the country’s economic development. It fueled the industrialization of the
country and transformed its living standards. However, together with this growth
comes consequences. A highly urbanized country because cities may not have
the adequate resources to accommodate all people.

Brazil is one of the countries with the largest biodiversity and has one of the
most advanced environmental policies in the developing world. The three policies
discussed in Chapter 4 briefs us as to how the country deals with the threat of
deforestation, environmental harm brought by agricultural activities and improper
distribution of its vast water supply. Besides the construction of national parks,
the country has its long-standing Forest Code as the sole protector of its forests.
This policy was revised in 2012 and requires landowners to maintain 50% of the
land as legal reserves. The new Brazilian Forest Code may actually bring a
compromise between agriculture and environment, according to a study released
by the International Institute for Applied Systems Analysis. In 2010, the Brazilian
government established the Low-Carbon Agriculture Program under the ABC
Plan, in order to reduce greenhouse emissions in agriculture. Also as a country
with a vast water supply, Brazil enacted the National Water Resources Policy in
1997, to properly manage their water resources.

Deficit in current and financial account brings both negative and positive
consequences in the economy. Deficit in the said account brings more income in
the economy in terms of investment both foreign and local. This proves that Brazil
is willing to spend money to buy stocks abroad and offers services both domestic
and international. Even though Brazil usually exports products especially in
China , it is not enough to make the current account become positive. Deficit in
financial account is a result of massive outflow of money from Brazil’s
government to buy stocks and invest assets abroad. This results to an increase
in income in the country but it doesn’t mean that when an economy is booming,
there will be no issues. For instance, Brazil is focusing in investing abroad and
the interest that they can get in that investment will serve as a payment for their
debt. This scenario can’t sustain the increasing debt on the country. The
increasing value of US dollar is also a factor that contributes to increase the debt
of Brazil as the time passes by. Not all the time, investment or income is the
answer to the problem of the country in terms of their economy. It is all about the
balance of outflow and inflow of money and a wise spending of money to achieve
a specific desire goal in the economy.

As year passes by, the economy of Brazil has been one of the largest
country which has been very dynamic through the years. And as year 2008-2017,
it shows lot of changes. By the year 2008 the inflation of the economy has been
very high in which it surpasses the inflation target of the year, causing the central
bank to increase its interest rate to control the economy. And by the year 2009
the inflation of the economy decreases, the central bank lower the interest rate of
the economy for it reaches below the inflation target. In year 2010-2014 the
inflation of the economy increases then decreases that shows a lot of changes
through the years. Then the economy reaches the highest inflation rate by the
year 2015, and slowly recovering by the year 2016 and reaches the lowest
inflation rate and interest rate in year 2017. Brazil experienced a lot of changes
in their economy for 10 years. Rather avoiding inflation, people and the
government must coordinate to learn and understand how economy changes and
how to control inflation given by the different circumstances.

As the basic indicators of development rises, the progress made in Brazil's

economic growth also increases due to numerous programs established by the
government of Brazil. Real income and access to health and education has
improved for the last few years. Having strong labor market and higher income
levels increased the probability of helping families living in poverty through
income transfer programs which aims to eliminate poverty and inequality. Easy
access to health programs increased the life expectancy at birth in the country
by providing a "health for all system" and quality access to health care facilities
such as hospitals and equipments which can prevent diseases, sickness and
injuries. Quality of education also increased by providing funds and educational
guidelines through the Bolsa Familia program which transfers income to the poor
under the condition that they send their kids to school regularly.

Brazil is not a developed country, but still a developing one. Though the
country has characteristics of a developed country, it inhabits more
characteristics of a developing one. Factors involved are its low levels of living or
GDP per capita, high infant mortality rate and low life expectancy rate when
compared to developing nations.

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