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Brazil Report

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REPORT – BRAZIL

Distribution of income
Brazil has historically a very unequal income distribution. In the 90´s Brazilian government believed that if high inflation rate were cut down, the income distribution would improve. In fact, after a successful plan of stabilization of the inflation, the unequal pattern of income distribution did improve in a consistent way in this decade.
Other important aspect about income inequality in Brazil is related to regional pattern of income distribution, which is extremely unequal between different regions of the country. Although a generally improved distribution of income took place, the differences between regions remained in the 90’s.
However, the current level of unequal income distribution is yet very far from the pattern of many developed countries. [1] Growth and structural changes have not altered significantly Brazil's extremely unequal distribution of wealth, income, and opportunity. Despite impressive increments in economic growth and output, the number of poor has risen sharply. Most of the poor are concentrated in the rural areas or in the country's large cities or metropolitan areas.
Poverty, measured by the local minimum wage, declined from over 52% of the population, in the beginning of the nineties, to about 38% in 2005, meeting the Millennium Development Goal. Extreme poverty, defined as income of less than a dollar a day (in purchasing power parity), declined from 8.8% to 4.2% in the same period. [2]

Trade
In 2004, exports reached US$ 100 billion, an all-time record for the period. Trade surplus also reached a record high of US$ 33,6 billion. In 2003, Brazilian exports had reached a Record US$ 73 billion, a 21% increase compared to the same period in 2002. This performance is more impressive if compared to the growth expectation for world trade this year, of only 2.9%.

If at the beginning the export list was basically raw and primitive goods, such as sugar, rubber and gold, today 74% of exports consist of manufactured and semi-manufactured products. [3]

Investment
Initiatives from the private sector and efforts by government agencies have contributed towards encouraging foreign investors to choose Brazil as a prime investment option, as well as providing incentive for investment from within the country’s borders through expansion, modernization and restructuring programs in various sectors of the economy. [4]

In the month of September 2007 , direct Brazilian investments abroad registered net outflows of US$2.1 billion, including US$330 million on net acquisitions of participation in the capital of companies located abroad and US$1.7 billion on net intercompany loans.

Foreign direct investments closed with overall net inflows of US$1.5 billion. Net inflows of investment in the capital of companies located in the country, including conversions into investment, added up to US$1.3 billion, while net disbursements of intercompany loans totalled US$194 million.[5]

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Foreign affairs
Brazil’s foreign policy seeks to contribute towards a peaceful and fairer world, where the rules of international law prevail, social and economic disparities are reduced among nations and within each country. It also strives for a multipolar world, free from individual domination, where global rules and actions are applied to overcome challenges through dialog and negotiation.

The construction of a South American alliance is of great interest to Brazil. The strategic alliance with Argentina, the determination to strengthen Mercosur (a tariff union) and to speed up commercial and infrastructure agreements form the bases for this integration.

In its dealings within the Free Trade Area of the Americas (FTAA), Brazil’s position has been constructive, in favour of a practical conclusion which preserves, above all, the sovereign instruments of each country regarding policies for development and the economy. The same posture is adopted by Brazil in its negotiations with the EEC and within the World Trade Organization (OMC).

In addition to its traditional ties with the USA and European countries, Brazil has sought to approach the larger developing nations. With India and South Africa, Brazil has created the Trilateral Forum for Dialog (IBAS), geared towards cooperation projects and global initiatives. Within the scope of the UN, a Fiduciary Fund for IBAS was created, for the financing of social projects in developing countries.

A series of important commercial agreements were signed with China on occasion of President Lula’s historical visit in 2004. With African countries, Brazil has established new bonds of cooperation for, among other reasons, the fact of Brazil being a country with a large population of African descendents. Increasing approach has also been made towards the Arab countries, and in 2005, by Brazilian initiative, the first ever Forum will be held bringing together South America and the Arab Countries. [6]

Human rights
Brazil today has the most detailed and wide ranging charter of human rights in its entire history. The Brazilian Constitution of 1988 is a watershed in their institutionalisation and serves as a reference point for establishing public policies for the protection and promotion of human rights.
The government does not encourage or tolerate violations of human rights. On the contrary, it recognises the need not only to punish, by means of legal sanctions, those responsible for violations, but also to prevent the occurrence of such violations through changes in the law and through establishing public policies for the protection and promotion of human rights.
Despite these positive changes, frequent and serious violations of human rights continue to occur, and it is common for those responsible to go unpunished.
In 1997, the Brazilian government launched the National Programme for Human Rights, the main aim of which is to promote and protect of human rights. The Programme was prepared in strict collaboration with society and sets out a list of short, medium and long term measures for expanding the promotion and protection of human rights in Brazil.
In the process of consolidating its democracy, Brazil has become a party to the main international legislation covering the protection of human rights. In this respect, the country is playing an active role in all the main international forums on human rights, including the UN Commission on Human Rights. [7]
The law prohibits discrimination on the basis of sex, race, religion, or nationality; however, discrimination against women, blacks, and indigenous people continued unabated, and there was widespread violence against homosexuals.

The law specifically prohibits, among other practices, denial of public or private facilities, employment, or housing to anyone based on race. The law also prohibits and provides jail terms for the incitement of racial discrimination or prejudice and the dissemination of racially offensive symbols and epithets. [8]

Labour
In the 1990s, the opening up of the Brazilian economy and the consequent need to lower costs in order to face foreign competition, combined with a strong recession in the first years of the decade, made employment situations worse, particularly with regard to industrial employment. [9]
Finance
The Brazilian financial system is in many senses unique among developing countries. The greatest challenge posed by economic development in respect to financial markets is how to become capable of supplying not only growing but also ever more diversified financial products both to investors and to borrowers. It is in this sense that the Brazilian financial system is somewhat unique: in comparison even to some industrial countries, financial institutions operating in the domestic market are in general diversified, dynamic and competitive, and markets for at least some types of securities are deep and liquid. Unfortunately, however, the financial system also exhibits some grave inadequacies, particularly in its role of supporter of economic growth. [10]

Technology
Brazil has the largest and most diversified system of science, technology and innovation in Latin America, a result of the accrual of accomplishments in the last 50 years, which include the capacity for oil prospection in deep waters and the ability to build aircrafts. Furthermore, the country invests in space and nuclear programs, as well as in new areas currently at the border of knowledge, such as nanoscience, nanotechnology and biotechnology. Brazil was the first capitalist country to bring together the ten largest car assembly companies inside its national territory.[11]
The competitive restructuring of the Brazilian economy, arising from its growing international integration, has led to substantial changes in the areas of science and technology (S&T). The central axis of the S&T policy goes from the field of invention and basic research to the fields of innovation and dissemination of technology.
Intense competition between companies in the international market has enabled a general increase in the flow of technology transfer. Brazil has a relatively well linked set of competencies in engineering and basic sciences which largely facilitate this process of transfer. Furthermore, that flow is at present facilitated by the introduction into the Country of new intellectual property legislation. [12]
The Federal Government’s Pluri-annual Plan foresees investments in the region of R$ 37.6 billion, between 2004 and 2007, a 54% increase on the R$ 24.4 billion invested between 2000 and 2003. The Federal Government, through various mechanisms, encourages the development, in 19 states, of procedures that will bring about innovation and add value to small business production. Technological innovation – new procedures, products and services – is one of the axes of the Federal Government’s Industrial, Technological and Foreign Trade Policies. [13]

Government strategies
For the first time in a generation, Brazilians are benefiting from stable economic growth, low inflation rates and improvements in social well-being. Since 2004, the Brazilian Government has coupled stable macroeconomic management with well-directed social policies. This double focus had good results. The economy achieved steady, though moderate, growth in 2004-2005, accelerating in 2006 and 2007. At the same time, inflation rates are around 4% a year, the balance of payments is registering record surpluses, the country has accumulated large foreign exchange reserves and there was a great drop in public debt vulnerability. In this context, the main objective of the World Bank’s partnership with Brazil is to help the country achieve its growth potential.[14]

In order to balance the economy, the country recently carried out reforms to its social security (state and retirement pensions) and tax systems, with the addition of a Fiscal Responsibility Law to control public expenditure at federal, state and municipal government levels. With a focus on administration efficiency, policies were created to encourage exports, industry and trade, thus creating “windows of opportunity” for local and international investors and producers.[15]

Among the main measures taken to stimulate the economy are the reduction of up to 30% on Manufactured Products Tax (IPI), and the investment of R$ 2 billion on road cargo transportation fleets, thus improving distribution logistics. Further resources guarantee the propagation of business and information telecenters. [16]

BIBLIOGRAPHY

[1] – Ministry of external relations (Brazil) website - Report on Income Distribution, by Geraldo Biasoto Junior & Marisley Nishijima – (accessed on 26/11/07) http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/economia/merctrab/drenda/index.htm [2] - The World Bank Website- Brazil- Country Brief – (accessed on 15/11/07) http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/BRAZILEXTN/0,,menuPK:322351~pagePK:141132~piPK:141107~theSitePK:322341,00.html [3] - Brazil Government Web Portal- Imports – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/economy/imports/ [4] - Brazil Government Web Portal – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/economy/ [5] - The Central Bank of Brazil Website - Banco Central Do Brasil, Foreign Sector – (accessed on 19/11/07) http://www.bcb.gov.br/?FOREIGNSECTOR [6] –The Brazil Government Web Portal – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/about_brazil/brasil_topics/foreign/categoria_view [7] - Report on Human rights, by Paulo Sérgio Pinheiro – (accessed on 26/11/07) http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/polsoc/dirhum/apresent/index.htm [8] – Nation by Nation Website - Country Reports on Human Rights Practices- Released by the Bureau of Democracy, Human Rights, and Labour, February 25, 2004 – (accessed on 26/11/07) http://www.nationbynation.com/brazil/Human.html [9] – Report on Labour Market by Cláudio Salm – (accessed on 26/11/07) http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/economia/merctrab/apresent/index.htm [10] - Report on Financial system by Fernando J. Cardim de Carvalho – (accessed on 26/11/07) http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/economia/sistfin/apresent/index.htm [11] - Brazil Government Web Portal – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/economy/

[12] - Report on Technology Research, by Milton de Abreu Campanário - (accessed on 26/11/07) http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/economia/ctec/pesqtec/index.htm

[13] - Brazil Government Web Portal – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/about_brazil/brasil_topics/science/categoria_view [14] - The World Bank Website- Brazil- Country Brief – (accessed on 19/11/07) http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/BRAZILEXTN/0,,menuPK:322351~pagePK:141132~piPK:141107~theSitePK:322341,00.html

[15] - Brazil Government Web Portal – (accessed on 19/11/07) http://www.brasil.gov.br/ingles/economy/imports/ [16] - Brazil government Web Portal – (accessed on 19/11/07)
http://www.brasil.gov.br/ingles/about_brazil/brasil_topics/economy/categoria_view…...

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