AFTER THE ECONOMICALLY DIFFICULT MID-1990S, BRAZIL STAGED A SIGNIFICANT RECOVERY IN 1999 AND ESPECIALLY 2000, WITH GDP GROWING SOME 3%, INDUSTRIAL AND AGRICULTURAL OUTPUT RISING, AND UNEMPLOYMENT DROPPING TO 6.4%. THIS TREND IS SET TO CONTINUE AS PRESIDENT CARDOSO'S MASSIVE PRIVATIZATION PLAN BRINGS STABILITY TO THE NATION'S FINANCES

Brazil has five times the population, three times the GDP and three times the land area of any other country in South America. It exercises such a controlling economic role that when Brazil experiences growth, so does the economic free trade alliance of the Southern Cone, Mercosur, as well as the continent as a whole.
The Brazilian economy has stabilized since January 1999’s devaluation of the real against the U.S. dollar. The country ended 1999 with a 1% growth and the optimistic forecasts for the year 2000 were borne out by rising agricultural and industrial output, with an overall economic growth rate of 3%, and signs of further growth for 2001.

Unemployment dropped to 6.4% last year with inflation stable at 3-4%. The return of confidence in investment projects is sweeping through the country in a manner that is peculiar to the boom and bust personality of the Brazilian economy. Having survived the Asian crisis of the late 90s Latin America is currently in an optimistic frame of mind, despite the slowdown of global growth rates.
Economic growth in the world’s industrialized countries is now forecast at around 2% for 2001 in the wake of the September 11 terrorist bombings in the U.S. Add the recent Brazilian energy crisis to the equation, and the upbeat mood has been tempered by a tight monetary policy that reined in last year’s growth. Further tightening of fiscal policy is likely following a US$15 billion loan from the IMF granted in order to protect the real from the effects of the ailing Argentine economy and to prevent Brazil’s huge debt burden (around 50% of the GDP) from growing further.

Brazil’s massive privatization program promises to end the nation’s history of boom and bust and bring a degree of stability to the country’s finances. This should encourage even higher levels of foreign investment than the US$20 billion invested last year, largely in telecommunications and infrastructure projects. As a result, industrial growth rose 6% and manufacturing and communications showed growth of 7% and 8% respectively. Agriculture contracted as sugar production fell 26% due to dry weather. However, it is now experiencing an upsurge and re-establishing Brazil as the number one global sugar producer. Tourism continues to rise following the arrival of international hotel chains in the last decade.

Brazil ranks 11th in terms of bilateral trade with the United States

With Brazil’s economy in good shape and its foreign debt unlikely to destabilize growth, the government now faces growing pressure to redress the country’s unequal income distribution and harsh urban social conditions. One third of its 170 million inhabitants still live below the poverty line. Despite massive foreign investment, per capita income has barely grown in the last two decades.

The resurgence of the Workers Party and Brazilian President Fernando Cardoso’s sanguine view of the year in prospect suggest that the country as a whole is keen to find ways of ensuring that some of the wealth from economic growth filters down to the general population.
Relations between Brazil and the U.S. are strong. The Bush administration is deeply committed to close relations with Latin America and U.S. companies are the top investors in the Brazilian economy. Add to this the fact that the trade balance between the two countries is evening out and Brazil is now one of the strongest commercial partners for the U.S., ranking 11th in terms of bilateral trade.