Brazil – The Rising Western Behemoth

22 Jul

We all have heard of BRIC, a term coined by Goldman Sachs back in 2001, now it has become a commonly used acronym. It simply stands for the four countries that were seen as the new rising economic powers. Starting in reverse order we have China, who have not only grow by leaps and bounds in recent decades, but it vying for Asian Hegemony. Next, India who has struggled a little more than China, but has some of the fastest growth is been seen in a country with the world’s newest Silicon Valley. Then there is Russian, the weakest member in this artificial group, has now fallen on hard times as the power of Petrol Dollars wanes, while rapidly rising inflation threaten the new and fragile consumer goods base. Now Russia, one an economic star has been deflated by over investment in energy. Now onto the first letter – B.

And B is for Brazil, the world’s firth largest in both land and people, a nation favoured to win the World Cup, Rio is even hosting the olympics in 2016. Brazil seems to be the place of the future and the center of growth for the Western Hemisphere. Brazil has a lot going for other than  Futebol (Porteguese for soccer) and hot women – it has some of the world’s richest soil for farming, numerous other natural resources, a cheap workforce and finally some stability. It appears that their current president Lula has become the socialist savior, helping decrease poverty, crime and democractic elections electing three presidents in a row without any coups or dictators. This might seem to be far from the American standard for stable democracy, but compared to Russia and China it shows a greater degree of control by the electorate.

The country is still plagued by many problems these two could be an obstacle for Brazil;s future. From the massive inequality (regional and racial), some of the higher crime rates in the world with more murders than all of Europe combined, and with 49,145 people were murdered in 2006, that is more than3 times the number in the US (As of 2008, statistics report were at 16,277 murders). So it is a major problem for Brazil, but the government is finally intervening. Slowly the government has installed new police stations, banks and schools in the worst favelas. The effects have been profound even in the notorious Cidade de Deus, the favela that inspired the film, City of God. Here is a good article from the economist talking about Brazil’s progress – http://www.economist.com/node/16326428

Brazil is a mostly urbanized country with about 86% of the total population live in cities, so the rapid urbanization that is occuring in India and China is further along, so new cities will not necessarily pop up. Still, it will experience some urban modernization and will have growth due to the suburbanization of its major city centers. It has a fairly modernly diversified economy with the major sectors accounting for: agriculture: 6.1%, industry: 25.4% services: 68.5% (2009 est.) Agriculture is close to 1/3 of exports and the industrial sector is booming right now so this combination should help grow their economy. One thing really matters and that is fact that Brazil’s  Central Bank expects national growth to be 5% for 2010 after experiencing the recession of last year.

Energy is also key to Brazil’s future because they have 72% come from hydroelectric, 10% from natural gas, and the remaining 18% from oil, biomass, nuclear, coal, wind. With this lack of fossil fuel dependence Brazil is poised to make leaps and bounds compared to many of global powers, especially with the massive growth in other renewable energy that is happening in most countries around the world. Even with gasoline for cars, Brazil was able to innovate. Currently, it is the worldest 8th largest consumer of Oil, but the 16th largest supplyier, a difference of about 600,000bbl/day. Even though this is true Brazil will be alright in the long run, because they have emphasized running cars off of sugar cane ethanol. In the 1970s, the Brazilian government implemented a widespread program that made it manditory to blend gasoline with a small percent of ethanol.  What was the end result?

The Brazilian car manufacturing industry developed flexible-fuel vechcan run on any proportion of gasoline and cars that can run entirely on ethanol. It is even mandatory that all gas has atleast 20 percent ethanol which has forced the car industry to shift their engines. So now with technology that is really only a decade old, a record 92.3% share of all new cars and light vehicle sales for 2009. Sugarcane ethanol represented 17.6% of the country’s total energy consumption by the transport sector in 2008.

International Leftists Unite

BRAZIL + IRAN = Strange position for US. We have often had a Monroe Doctrine approach to all our Southern neighbors, but in this new global era, nations can pick and choose their allies less based on geographical proximity and more along Ideological lines. Brazil is not anit-US, but our Imperialist mentality towards Latin America has caused some region backlash. Beyond Chavez’s push to create an non-western alliance, Brazil is actively trying to become a new regional hegemon, first by growing their trade deals and alliances with Iran and Turkey and securing their region strength in Latin America. Still we should make note of the fact that Brazil still mainly trades with Western nations and China [ Exports -US 13.7%, Argentina 8.7%, China 8.1%, Netherlands 5.2%, Germany 4.4%; Imports – US 14.9%, China 11.6%, Argentina 7.9%, Germany 7%]. Thus, Brazil will have to be careful not to alienate its primary trade partners in their efforts to reach out to Iran and other dubiously run countries. Currently, they are trying to appease both sides and something will have to give, will they choose Iran over the US?

Governance has been Brazil’s problem for much of its history. For over 20 years it has been able to have peaceful elections, that back in 2002 elected Luiz Inacio Lula da Silva as president and he has still been in power. If Lula holds back on over spending money beyond the government coffers he will be fine. That could be harder said than done with a leader as Leftist as he is, plus he has promised a lot for Brazil. The future of Brazil really lies with the winner of the next presidential election this year between Lula’s successor, Dilma Rousseff (his current Chief of Staff) and Marina Silva, who was a prominent politician and former mayor of Sao Paulo.

Brazil still has some really big issues, they quickly exited the global recession nad have new found energy resources, from offshore oil to natural gas deposits.  They have a large labour force (approx. 102 mil., 6th in world) that could easy be employeed in new businesses and while crime is rampant, in places like Ciudad de Deus have seem massive drops in crime. If more postive social spending can be controlled without over spending and corruption could be checked Brazil will become one of the most powerful economies in the world. Still, Brazil could end up like Argentine and fall short of its expectations due to debt, political upheaval due to inequality or the state could take too much control of the nation as they did back in the the 1960s and 1970s. Or they could grow to become the next great world power as they grow their economy, military and technology as part of a silly acronym.

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