Aiko, Soya, Matsuo 20

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The Economy of Brazil

Hidemi Aiko

1506213

Takumi Soya

1506256

Yumi Matsuo

1506301

Soka University

Faculty of Economics

International Program

Economics Lecture B Advanced B

Raymond Yasudas

January 17th

The Economy of Brazil

Part 1: Economic Indicators

[You need an introduction to this section.]

Gross Domestic Product (GDP) by ______

Figure 1-a. Nominal (current US$) and Real (constant US$ in 2010) GDP. From “The World Bank” 2016. Retrieved on October 3, 2016 from http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=BR

Figure 1-a shows the Nominal and Real GDP of Brazil from 1960 to 2015. GDP (Gross Domestic Product) indicates that the total economic value of final goods and services which is produced in a year. The Nominal GDP indicates the total economic value in one year with by using the price of in that year. On the other hand, the real GDP indicates only the output in one year with using the base year price. It eliminates the influence of inflation. In the calculation for real GDP in 2010, the current US$ rate was used in 2010 is used by the real GDP calculation, so the both types of GDP make the interaction point intersected in 2010. Both of the trends of nominal GDP and real GDP kept increasing during the period [Exactly which period are you referring to?]. Before 2010, the nominal GDP is was below the real GDP, and this meant that the price level is was higher in 2010 before than in previous years. The higher price is was caused by strong inflation in Brazil.

To see the Nominal GDP, it rose rapidly from 2002, and it exhibited a became steeper increasing. The Inflation had kept [Kept what?] since from 2002, then the price level caught catch up to the GDP in 2010. From 2013 to 2015, the nominal GDP is declined, and it means that the price level was went going down, which we call the deflation.

To see the Real GDP, it shows constant increasing increase during the period [During what period?]. in the long term see. [What does this mean?] This means that the quantity of output of Brazil kept increasing, and the economy was going expansion expanding. However, from 2013, nowadays, the real GDP has been declining is decline from 2013, because the economy is contracting.

Figure 1-b. GDP growth rate (annual %). From “The World Bank” 2016. Retrieved on October 3, 2016 from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=BR

Figure 1-b shows the real GDP growth rate of Brazil from 1960 to 2015. The GDP growth rate indicates the change in the real GDP (base is 2010 US$) from the previous year and its positive or negative indicates growth or contraction of GDP. The graph shows Brazil's economy expanding or and contracting and as it fluctuated between -4.39 % and 13.98 % during this period. The fluctuation trend is no the fluctuation is less volatile from 1994 than before in years prior to 1994, and almost years of rate are expanding [What does this mean?]. From 2012 until now, the GDP growth rate has been contracting Then it is contraction from 2012, nowadays.

There are two main trends in the GDP growth rate. One is from a higher growth rate in the 1960s and 70s higher growth, and the other is from 1980 the beginning of a shrinking growth rate began to shrink from 1980. Firstly, the economy continued to be produce a high growth between 1964 and 1972. The Household consumption was approximately between 67 % and 72 % of GDP during the1960s, so the with consumption continuing continued to rise constantly (World Bank, 2016) [This citation is not in the reference list. Add this reference to the list.]. Then [When is "then"?], other parts of GDP started to grow was growing, especially investment. Capital investment's, percent of GDP was rapidly rising that it changed 16.9 % changing from 16.9% in1968 into 26.8 % in 1976 (The global economy, 2016) [This citation is not in the reference list. Add this reference to the list.]. The large scale of capital investment in infrastructure and industry helped to establish new industries more and more. [Give a specific example of this.] People called this situation “Brazil miracle.”. [The period comes before the closing quotation mark.] Raising Rising investment impacted the higher economic growth in the latter half of the 1960s and in the 1970s. The turning point was the lowest point in 1980. In 1980, Brazil experienced its the lowest growth rate is at minus – 4.39 %, and the economy was contracting because of failed policies of policy and high inflation at that time, Secondly, from 1980, the growth rate improved peaking at 7.95 in 1984 and 1985 but plummeted to is peak [To peak is to reach a very high point. You cannot peak downward.] to –3.10 % in 1989. This drastic drop, and it was connected to the failure of the policy for stabilization by policy from 1986 to 1989. This period is explained in more detail in Part 2 of this paper.

Unemployment by ______

Figure 2. Unemployment rate (total % of labor force). From “OECD” 2016. Retrieved on October 14, 2016 from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=BR

Figure 2 shows the unemployment rate of Brazil from 1981 to 2014. The unemployment rate shows the number of unemployed people as a percentage of the labor force. People include in the unemployment rate are people who have no job, who are looking for a job, and who are ready to work immediately if a job is available. In genial [Check your vocabulary. The word is "general" not "genial." Genial means "friendly and cheerful."], the unemployment is a lagging indicator of economy. The rate is changed changes little after economic changing change, expansion or contraction. The reason why it is lagging is that firms do not change the number of their employers employees immediately to adjust to the a volatile economy. The Labor cost in firms is so difficult to adjust immediately to match companies’ economic conditions. The Unemployment has fluctuated fluctuation is between 4.85 % in 2014 and [Why are you going backwards?] 14.11 % in 1981 and 4.85 % in 2014.

There are four main trends of Brazil's unemployment rate were four. They are connected to economy expansion or contraction which was showed is shown by GDP growth rate. Firstly, the unemployment rate was going down with changing about decreased from 12 % into 6 % between 1984 and 1986. This was the lagging of economic expansion from 1978 to 1980. [Explain this point a little more. What happened in between 1978 and 1980?] Secondly, from 1989 to 1992, the unemployment rate was rising rose because of economic contraction continuing from 1985 to 1989, and this period is explained in greater detail in explanation is in Part 2 of this paper. Thirdly, from 1995 to 1999, the unemployment rate rose from 8.29 % to 13.49 %. [Briefly explain why this happened.] Finally, from 2000, the has been going trends became downward. For the job market in the last decade, more the female labor force has become became stronger. In 1993, 31.8 % of employed people is women in 1993, and it in 2003, the percentage increased to 36.6 % in 2003. The more women who participated in the job market, the lower less the unemployment rate was.

Inflation by ______

Figure 3-a. Inflation, consumer prices (annual %). From “The World Bank” 2016. Retrieved on October 14, 2016 from http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=BR

Figure 3-a shows the annual % percentage of inflation rate of Brazil from 1981 to 2015. The inflation rate indicates that the rate at which the general level of prices for goods and services is rising. The fluctuation of the inflation rate is between 3.19 % in 1998 and 2947.73 % in 1990. The trend is strange because Brazil has faced the hyperinflation from 1987, and the highest peak of the inflation rate is 2947.73 % in 1990. There are two main points on Figure 3-a of the inflation graph are two. One is the peak of hyperinflation in 1990, and the other is the end of hyperinflation in 1995. For the first point in 1990, [Give a brief explanation of this point.] A detailed the explanation is provided in Part 2 of this paper. [Explain the second point.]

Figure 3-b. Inflation, consumer prices (annual %). From “The World Bank” 2016. Retrieved on October 14, 2016 from http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=BR

Figure 3-a 3-b shows the annual % of inflation rate of Brazil. The term is after shrinking hyperinflation from 1998 to 2015 after the period of shrinking hyperinflation. The fluctuation of the inflation rate is between 3.19 % in 1998 and 14.71% in 2003. The trends key point of this figure is the peak of the inflation rate in 2003, and it is at 14.71 % because the new president of Brazil, Lula da Silva, promised that the tight to tighten fiscal and monetary policies. The reaction of investors who invest in to Brazil was changing a restored investors' confidence in Brazil, and they felt that the government [I think this is what you mean. Please confirm.] should allow interest rates to fall further. In a feisty defence [Check your spelling.] of his record, the central bank's governor, pointed out that recovery began last July, and that growth reached an annual rate of 6% in the final quarter. Most economists still expect growth of 3-4% this year [When is "this year"? 2016? If this is in a past year, you need to use the past tense of the verb expect --> expected.], spreading out ranging from booming exports to domestic consumption and investment. Household consumption fell a record 3.3% in 2003, while interest payments on the public debt snaffled comprised almost 10% of GDP. [Explain why this happened.] The GDP growth rate is was down from 3.09 % in 2002 to 1.14 % in 2003. [Explain why.] After [After when or what?], the rate dropped to 6.59 % at once. [Explain why.]

Major Interest Rates by ______

Figure4-a. Deposit interest rate. From “The World Bank” 2016. Retrieved on October3, 2016 from http://data.worldbank.org/indicator/FR.INR.DPST?locations=BR

Figure4-b. Deposit interest rate. From “The World Bank” 2016. Retrieved on October3, 2016 from http://data.worldbank.org/indicator/FR.INR.DPST?locations=BR

Figures 4-a and 4-b shows the deposit interest rate of Brazil from 1985 to 2015. The deposit interest rate indicates the amount of money paid out in interest by a bank or financial institution on cash deposits. Banks pay deposit rates on savings and other investment accounts. For example, a deposit interest rate will often be paid for cash deposited into savings and Money Market accounts. Saving accounts earn a rather low rate of interest, but cash deposited in certain other accounts types are also paid a deposit rate by banks and financial institutions. [Explain why Figure 4-a shows a flat deposit interest rate from 1995 to 2016 while Figure 4-b shows a highly fluctuating deposit interest rate from 1996 to 2015.]

[State how many key points is shown in Figure 4-a and explain each of the key points.] According to Figure 4-a, from 1985 to 1988, the deposit interest rate of Brazil fluctuated between 295% and 860%. [Explain why.] However, from 1988 it jumped to about 5,800% and from 1989 the deposit interest rate jumped to about 9,394%. [Explain why.] After that, in 1991, the deposit interest rate suddenly decreased to 913%. [Explain why.] From 1992 the deposit interest rate again increased to 1,560% and in 1994 jumped to 5,175%. [Explain why.] Also, from 1995 the deposit interest rate went down to 52%. [Explain why.]

[State how many key points is shown in Figure 4-b and explain each of the key points.] After that from 1996 to 1999, the deposit interest rate fluctuated between 26% to and 28%. [Explain why.] Furthermore, from 2000 to 2005, the deposit interest rate fluctuated between 15 to and 21%. [Explain why.]After that from 2006 to 2016, it fluctuated between 7% to and 13%. [Explain why.]

From 2000 to 2003, the deposit interest rate increased 4%. In 1997, the crisis of money happened in Asia and in Russia. After that, Brazil also experienced crisis of money because the effect of Asia and Russia is very big, so that is the very huge effect for the market of Brazil’s capital and money. In addition, a lot id foreign capital became outflow from Brazil, so the value of real dawn. So, in November 1998, IMF and America decided to give the 415billion to Brazil, but in January 6, Brazil did moratorium. So foreign investor escaped their capital from Brazil, and Brazil declined the value of real and desired to change fixed exchange rate to floating exchange rate. From 1999, the central bank of Brazil, BCB adopted the system of inflation target. That policy is when inflation increase, the central bank increase the interest rate. By doing that, inflation can be decreased because the deposit rate increasing. That means people can earn from interest rate with increasing deposited money. So people deposit their money into the bank and the flow of money can be stopped. So the Real depreciation means the deposit rate increase. In addition in 2002, the Lula, Brazilian politician who was decided to become the president. In that time the foreign investor started sell of real because of anxiety of government of Lula. So the exchange rate was declined and then the interest rate increased. That happened was called “Lula shocked”. But from 2003 to 2010, the deposit rate declined 13percent. That period was the period of government of Lula. In that time, the Brazil’s export increased and current account became surplus. So investment for Brazil increased and increased inflow of foreign capital. That means value of Brazil increased and the deposit interest rate decreased. [Include this information in the explanation of the key points.]