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Brazil: Slow Growth Factors Essay

2686 words - 11 pages

Background
Brazil is one of the wealthiest countries in the world with a Gross Domestic Product (GDP) of $2.253 trillion. In 2014, Brazil will host the World Cup and, again in 2016, it will host the Olympic Games. Hosting these two events will surely lead to large investments inside the country. With resilient banking system, low inflation rate and strong domestic markets, Brazil’s economic growth is stable. However, Brazil also experiences from income inequality and social factors differences such as education, health and livelihoods. Although, Brazil economy itself is stable, compare to OCED countries, its economic growth is much slower. From 1950s to 1970s, Brazil economy grew the above both the developing and developed countries due to the industrialization of steel and automobiles infrastructures, which were the important factors of economic growth. However, those years were the peak of Brazil’s growth.
Introduction
Since the late 19th century, Brazil economic performances have not grown as high as the 1950s and 70s, and remains as raw materials exporters. Many literatures and researches have been conducted to search for a reason of Brazil’s slow economic performances. Most of the literatures concluded that, despite having the potential to grow, Brazil has not invested in knowledge and technology sectors much, which are the driving force of a country economy. Therefore, there are ongoing discussions in Brazil national level to improve infrastructures and educational reforms. However, knowledge and technology are not the only drivers of growth in Brazil. There are other economic growth elements such as interest rate, trade policies; social inclusion, etc. With this opinion, this paper argues that improving knowledge and technology sector alone cannot help Brazil’s sluggish economy unless the government fills its weakness in government sector, economic sector and public sector.
Government Sector
Brazil’s economic growth is relatively slow compared to other emerging countries. Many scholars have analyzed that it is due to the lace of innovation of technologies, which is in fact true. However, we should also look at some other factors that affects the country’s economy. To get growth, the government of Brazil need to readjust its interest rates, exchange rates, tax rates and government consumption because these elements are directly affecting the investment inside the country.

Interest Rates, Exchange Rates

Brazil interest rate is one of the highest in the world, which is 10.5 percent. Because of having inflation and weak exchange rate inside the country, the Brazil government took a step in making its interest rate even higher. Currently, media has been questioning on whether Brazil will increase its interest rate. Economists point out the fact that the higher interest rates can harm Brazil’s future growth (Matthew Cowley and Rogerio Jelmayer, 2014). However, some scholars argue that despite the high interest rate, Brazil’s...

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