Unlike in the past, Brazilian economy seems to be equipped well to tackle the global financial turmoil. After a spate of boom and bust cycles, Brazil is in the middle of an unabated economic growth period since the 1970s. With a population of 190 million, which is slowly but steadily growing, Brazil has emerged as the 9th largest economy in the world with a GDP of $1.3 tn, which is equal to half of Latin America's GDP. Apart from commodity boom, the economy has also been fueled by consumer spending, as Brazilians enjoy rising incomes and cheaper credit. Brazil has found a key element that had long been eluding it: a currency with staying power, Real, doubled against the US dollar in the last four years. This has helped foreign reserves climb to nearly more than $180 bn. The economy grew by 5.3% in 2007; though it is less than Latin America's 5.7% and a far cry from Chinese growth levels, it is still quite an achievement for a nation that expanded by only 2.5% in the previous decade.
The expansion has given a chance to Brazil to build up enough foreign exchange reserves to repay its entire foreign debt to IMF and, for the first time in the history, become a net creditor nation. In fact, Brazil has recently announced that it would follow other emerging economies like China and Middle East in setting up a Sovereign Wealth Fund worth approximately $20 bn. Besides, the government has unveiled a new $125 bn industrial policy plan to give boost to exports and high-tech industries through tax holidays, venture capital and a host of other incentives. |
