A Microscopic Look at One of the World’s Fastest-Growing Economies

It is no secret that Brazil’s economy is rapidly growing.  With an annual GDP growth of more than 5% the past several years (7.5% in 2010), Brazil is one of the fastest-growing major economies, and in recent years, Brazil has become the poster child for emerging market economic reorg.  Well, I think it’s safe to say that Brazil has finally emerged.

A few weeks ago, Counselor Philip Fox-Drummond Gough, Head of Trade Promotion Investment of the Embassy of Brazil, came and spoke to our class about the economic situation in Brazil.  It was interesting to learn more about Brazil’s economic growth from his perspective, and to connect these lessons to our specific projects.

Among topics he discussed, Counselor Philip Fox-Drummond Gough attributed Brazil’s extreme economic growth primarily to three distinct causes: macroeconomic factors, social policy, and exogenous factors.  In ’93, Brazil saw inflation rates of about 2,000%, but an economic plan that was implemented the same year helped to stabilize that rate, and now officials are shooting for 4.5%. 

In the past, Brazil was known as a country possessing one of the greatest gaps between the rich and poor, with a Gini Index of 60.7 in 1998 (4th in the world).  As a result, although Brazil boasted a population of 190 million, only a small percentage could actually reasonably affect the economy.  In recent years, however, that gap has been closing as 13 million people entered the middle class in the past 8 years.  Brazil is now placed as 10th on the Gini scale, with a score of 56.7 – still a wide gap, but the country is making great strides.

Having a solid understanding of Brazil’s economic history and current situation is particularly relevant to the project we are working on – making recommendations on how to enhance the spectator experience (including how tickets are distributed) during the Olympic Games.  One of the interesting things we found is that less than half of Brazil’s population has a credit card, and those who do really don’t even use it that often, only charging an averaging of about $70 per month.  Part of this could be due to interest rates that exceed 200%, but much of it is also likely due to the fact that Brazil just isn’t a plastic economy quite yet.  Though the percentage of Brazilian’s who possess credit cards is steadily growing and given more than half of Olympic spectators are from the host country, this will likely impact the way in which tickets for the Olympic Games are distributed (in the past, everything has been done purely online).  This also presents a huge opportunity for one of the Olympics’ primary sponsors – Visa – and their golden objective during their sponsorship window will most surely be to ensure that every single Brazilian holds a Visa card after 2016.  But, of course, the bottom line for Brazil will be to help improve their economy, infrastructure and social situation, and they are well on their way to doing so. 

~Andrea

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