With a gross domestic product of $1.92 trillion in 2022, Brazil is the world’s eleventh-largest economy and the largest economy in Latin America.
Until 2012, Brazil had been one of the world’s fastest-growing economies. However, since then, its growth has been weighed down by multiple issues, resulting in a declining growth rate. In fact, Brazil entered a recession in 2014 before beginning a modest recovery.
By2018,Brazil's GDP growth was 1.8%. In addition to just moderate economic growth, the nation has been fighting corruption within its borders, which destroyed the confidence of investors.
Meanwhile, low commodity prices, slack demand, and high inflation andinterest rates have been problems as well.
Key Takeaways
- Brazil is the eleventh-largest economy in the world and has seen essentially moderate economic growth since its 2014 recession.
- The services sector is the largest economic sector in Brazil and accounted for 58.9% of GDP in of 2022.
- Agriculture and industry also contribute a substantial amount to Brazil's economic growth.
- Despite some years of high growth, Brazil's average annual growth since 1980 is under 3%.
Growth Trends
Brazil’s GDP growth has been uneven, with periods of very high growth and intermittent periods of slowdown, as well as dips. This is why, despite achieving high growth rates at times, the average gross domestic product (GDP) figure for Brazil over the 35-year period since 1980 is less than 3%.
Despite this growth level, Brazil has achieved a lot. The period of 2003-2012 witnessed steady growth and reduction in the levels of poverty and income inequality existing in the country.
According to the World Bank, “the income level of the poorest 40% of the population increased by an average of 7.1% (in real terms) between 2003 and 2014, compared to a 4.4% increase in income for the population as a whole."
The composition of Brazil’s economy reflects the dominance of its service sector, the strength of industry, and the continuing importance of agriculture.
Service Sector
The service sector is the largest sector of Brazil's economy, comprising 58.9% of its gross domestic product in 2022. While the percentages contributed by agriculture and industry over the years have declined, the service sector has taken up the slack. It has represented more than 50% of the country’s GDP since the 1990s.
The service sector is the biggest employer for the country’s workforce. In 2000, it employed approximately 61% of the workforce. That percentage gradually increased over time and stood at 70% in 2021.
Workers are employed in various departments and services such as hospitality, financial services, repair shops, information technology, bureaucracies at the national and local levels, as well as public utilities and special agencies.
Important Industries
Brazil's service sector includes industries such as hospitality, financial services, retail sales, and personal and professional services.
The financial industry is by far the most important. Brazilian banks showed great strength during the 2008 meltdown. The banking industry provides huge amounts of funding for mega projects in mining and aerospace, among other industries in the country.
Other than financial services, travel and tourism are considered essential components of the service sector. Their direct contribution to Brazil’s GDP was 2.9% in 2018 and is projected to be 2.92% in 2023. Travel and tourism revenue includes money generated by hotels, travel agents, airlines, restaurants, and other directly supported activities.
3.77 Million Per Day
The number of barrels of oil (crude, petroleum liquids, and biofuels) produced in Brazil in 2022, making it the world's eighth-largest oil producer.
Industry
Brazil has a well-diversified and well-developed industrial sector, though growth rates haven't been consistent. In 2022, it was 20.7% of GDP, up from a low of 18.2% in 2017.
The rate of expansion in the country's industrial activity was at its peak during a period of expansion and modernization from 1968 to 1973. From 1974 to 1985, the country's focus was on import substitution and the growth of manufactured exports. The initial focus of import substitution was the basic inputs and capital goods.
The import substitution industrialization (ISI) policy ended in subsequent years. The government pushed comprehensive programs to further the development of its industrial sector. Brazil’s industrial growth was high in the 1970s and 1980s. From about the mid-1990s on, it slowed. For example, in 1984, industry was 46.3% of GDP. In 2017, it was the aforementioned 18.2%.
The Importance of Manufacturing
Manufacturing, which is a significant subset of the industrial sector, contributed 11% to the country’s GDP in 2022. Brazil has advanced industries in the fields of petroleum processing, automotive, cement, iron and steel production, chemical production, and aerospace.
In addition to those, the food and beverage industry is a very crucial part of the manufacturing sub-sector. The availability of cheap labor and abundance of raw materials has helped Brazil's industrial development.
Agriculture
Brazil’s transition from a net food importer to one of the largest exporter of agricultural products in the world has been spectacular.
Technically, since agriculture represented 6.8% of Brazil’s economy in 2022, it cannot be called an agricultural country. But the importance of the sector goes far beyond what statistics suggest. The country’s agricultural sector supports its fast-growing agribusiness sector, which has been an essential component of Brazil’s economic progress over the years.
Factors Aiding Production
Several factors have helped increase and diversify the production and exports from the agriculture andagribusinesssectors. These include modern technology and agricultural research, government policies funding agriculture, and the development of new frontiers for farming since the 1970s.
Brazil’s production of agriculture and livestock increased significantly after the 1990s, with a second thrust around 2000. Agriculture provided 10% of the country's total employment in 2021. Some of the most significant agriculture produce and export items are coffee, soybeans, sugar, beef, chicken, orange juice, and corn.
Has Brazil's Corruption Problem Improved?
Somewhat, if you consider its corruption ranking. According to Trading Economics' corruption stats for Brazil, the country has dropped from a high of 106 to 94 in 2022. Its average rank from 1995 to 2022 was 68.36. As for where 94 places it compared to other countries, in 2022 Somalia had the worst ranking of 180 and Denmark, with a 1, had the best.
Is Brazil's Economy Strong?
In the fourth quarter of 2023 it was. Real GDP grew at 8%. Although domestic demand and the manufacturing sector have weakened, consumer spending may increase as tight governmental financial constraints ease.
Is Brazil Considered a Third World Country?
No. Due to its production capabilities and growing economic strength, Brazil can be considered a developing nation.
The Bottom Line
Brazil has been emerging from the rough patch and recession of 2014. This Latin American country is also adopting needed reforms with an eye on its future growth trajectory. In that respect, increasing productivity, competitiveness, and investment are all crucial for its successful growth rates in the years ahead.
