Brazil socio economy Essay

Brazil is one of the South American countries and the fifth largest country in terms of geographical area. It has population of over one hundred and eight three million people. The Brazil’s natural resources largely includes gold, iron ore, manganese ,bauxite platinum, tin ,uranium, timber and petroleum among others. In most part of Brazil’s history, it has experienced very slow economic growth. For instance, during the colonial period sugar, gold and slavery did not boost the economy of the country. In fact, in mid-eighteenth century, Brazil’s economy retardation did worry Portuguese rulers. During the time of independence, Brazil had one of the least productive economies in the western hemisphere than any other New World colony. After the independence it did not show much progress. When the industrial revolution seemed to gather momentum, imperial Brazil economy was stagnating. As slavery ended marking the fall of the empire, its per capita Gross Domestic Production (GDP) was less than a half that of Mexico and making one sixth of the United State. This show some improvement from 1913 to 1980 where it sustained significant economic growth though interrupted by the Great Depression in early years. However, over the past quarter century, its economy has barely grown. Each time it makes attempt to rise it falls back. Similarly, its social inequality has also been historical. Social inequality has been there through different periods, in various economic models, in dictatorships and in democratic transitions. Therefore, the main purpose of this presentation is to discuss reasons which that have contributed to social inequality and economical stagnation in Brazil. From 1500 to late 1930s, the Brazilian economy relied heavily on the production of primary products for export. In fact, its economy assumed colonial master policy that was sternly enforced during its reign that for about three centuries has curbed the development that lasted past independence. There were some changes that occurred when slavery was abolished and waged labor adopted. First important structural transformation steps were recorded in 1930 when Brazil changed into a modern, semi-industrialized economy. They were intensely felt between 1950 and 1981 when economic growth rates remained quite high with establishment of diversified manufacturing base. After World War II rapid socioeconomic transformation took place. But since early 1980s, Brazil’s economy has been encountering economic huddles that have seen it have very slow growth if not stagnation. When second oil shock stuck in 1979, the prices of oil importation in Brazil double and this had effects on trade in that it lowered terms of trade further. The increase in world trade rates caused rise in Brazil’s balance payments and size of foreign debt though country did not stop borrowing meanwhile it tried to maintain high-growth strategy. In start of 1980s, foreign debt became so acute which led to introduction of program that could generate growing trade in surpluses so that country could amortize the foreign debt. This was achieved by reducing imports and expansion of exports. Consequently, real gross domestic production declined. Mexican debt crisis of 1981 blocked Brazil’s access to international financial markets that caused much pressure for its economic adjustment. Structural Adjustment Plan was introduced by International Monetary Fund that enabled the country to meet interest payments on the debt. However, this subsequently resulted in much of economic decline compounded with high inflation rate. It happened that, inflation accelerated further due to a combination of number of factors namely the exchange –rate devaluations of austerity program, growing public deficit and escalating indexation of financial balances and wages among others. The exchange –rate devaluations of the austerity program and growing public deficit formed a classical cause of inflation. Nevertheless, increased indexation of financial balances and wage were just important mechanism for propagating inflation. At around mid 1980s, foreign debt was almost displaced by domestic debt that caused main economic problem. Previously, during period of high economic growth in 1970s, considerable portion of foreign borrowing was done by state enterprises which were the main actors in the import-substitution industrialization strategy. At first they borrowed with intention of financing their investments but later due to acute shortage of foreign exchange they were compelled by the government to borrow unnecessarily and thus increasing their debts greatly. This was worsened by the sharp increase of international rates. This followed that because the state enterprises were not supposed to go bankrupt; their debt burden was borne by the government which further increased the public debt. Coupled with disorganization of the public sector, public debt was transformed in to a big economic problem. By the end of 1980s it was necessary for large-scale fiscal reform that could result to non-inflationary financing of the public sector not only for inflation control purposes alone but also restore the public sector’s capacity to be able to invest for overall economy recovery. But this was hampered by political challenges which could not make any reform to materialize. Several attempts were mounted to bring down inflation which was the most visible symptom. There were referred to as ‘heterodox economic shocks’ namely Cruzado Plan, the Bresser Plan and the Summer Plan that came in succession in each year from 1987 to 1989 respectively. These plans did no make the situation any better. By the start of 1990s, the country was ushered into a new era that probably radiated some hope to recovery of the economy that was marked by the first post-military president Fernando Collor de Mello in March 1990. Hyperinflation and virtually bankrupt public sector was the first things he had to fix with his new administration. But preceding events could not promise any good outcome to mobilize stagnating economy. Two years later, the President Collor de Mello was impeached on corruption charges. Therefore, it is evident that the ‘undeveloped’ of Brazil’s economy has been caused by several factors. Brazil’s geographical position is one of the factors that have contributed to its slow economic growth. This is because most of it tradable natural resources are too far from potential markets for profit exploitation. For instance, during the colonial period major export was sugar which had to be produced within fifteen miles of a port or navigable river. But the huge Amazon River system flows through vast tropical forest where land is unfertile and there were no navigable rivers that were flowing where export crops could be produced using modern scientific farming methods. Brazil though had a long coastline a few were protected harbor and without railways or truck, what was produced in interior was cattle and slaves that walked to the market The same challenges face the country even today. The issue of poor transport is affecting the Brazil’s industries considerably. The government has often failed to meet export target due to the country’s transport problem and shipping of the production. Logistically, it has proven that even though it was to transport, the operating cost would increase the merchandise prices and hence lose in world market. This greatly removes Brazilian competitive advantage and makes it not to earn sufficient foreign exchange to boost it economy. World Bank has reveled that transport expenses account for about thirty five percent of the operating cost . This adversely affects even private companies. This generally had resulted to chronic lack of investment that has caused country’s economy not to develop. Another important factor to economy growth failure is the effects of the International Monetary Fund’s structural adjustment policy that trace way back to the 1980s. When the Brazil foreign debt happened to be high and was challenging to service it, International Monetary Fund to help the country, it introduced Structural Adjustment Policy which acted as stabilization program. However, it was designed from an orthodox monetarist perspective whereby it prioritized debts solvency through fiscal austerity and failed to address the core problem of Brazil’s economy. It did not curb rising inflation or initiate significant economic growth; rather it created hardship in the country. Another cause of the economy’s failure to thrive in Brazil is leadership. Brazil political leadership was characterized by emperor, politicalmachine, dictator, military authoritarianism, several military coups and impeachment leaderships. Most of these leaders’ agenda did not feature Brazil’s interest in their hearts as they establish themselves. Consequently this has made country economy to retrogress. Lastly, concentration of wealth to few minorities has perversely affected the Brazil’s economic growth. It has been observed that income inequality distribution in Brazil is one of the most unequal in the world. This has caused high poverty rates, chronic malnutrition and preventable disease that have caused the economy to drag. It is true that Brazil is socially unequal. It has been recorded to be one of the nations with high rate inequality. Its income inequality measurements according to the United Nations Development Program (UNDP) are relatively higher than even some of very poor African countries such as Lesotho, Namibia or Sierra Leone and yet it belong to the wealthiest countries. The country has high income concentration that reveals that about one percent of the population belong to the richest which constitute to less than two million of the total population having approximately thirteen percent of all of household income. These results of poverty level have shown inconsistency in regards to its economic size. According to the Institute for Applied Economic Research (IPEA) data, about thirty percent of the population with is equivalent to fifty four million people are considered to be poor. Within this same group, about twenty million people that account for almost twelve percent of the population are ranked as been extremely poor. As it can be seen, this poverty level is higher than the average ten percent in countries with a per capita income similar to that of Brazil or those countries which have a poverty level three times less than Brazil. Inequality is more pronounced in the rural areas whereby small number of large owners such as large farmers, large rural entrepreneur who are seen to monopolize most of the rural areas coexist with thousands of small land owners, landless workers and rural workers who live in precarious conditions. From the start, there exists high level of land inequalities which continues to escalate. It has been found that, the percentage of the total area occupied by the ten percent largest properties is about seventy eight percent. Similarly, there is also a gap between the rich and the poor in urban areas in which more than eighty percent of the Brazilians live presently. A good percentage of urban dwellers are living in poor conditions without proper housing and access to public equipment and public health and recreation facilities among others. Access to housing also remains highly unequal based in regional basis. For instance, while in southern region and southwest region housing conditions are approximately thirty one and twenty seven percent respectively, this percent rises to about seventy percent in the northern region and sixty percent in mid-west region. At the same note, there is also serious problem in the housing deficit whereby it is estimates that close to eight million units with ninety percent of housing deficit mainly affect poor families with an income of barely three minimum wages in a month. From this brief analysis, poverty in Brazil is associated with color and location that is, it affect the black and is concentrated in northeast region. This is because, two-thirds of all the poor in Brazil are block and seventy percent of the total population living in the in poverty are city dwellers and close to fifty one percent belong to such population who are living in northeast region. The main cause of inequalities discussed above is not due to general lack of the resources but rather it is caused by their imbalanced distribution of resources. Such inequalities in contemporary democracies seem to be attributed to tensions that exist between the ethical requirements related to ‘right’ and the importance of economic effectiveness; between the legal order that promises equality and the realty of the exclusion which is brought about by the exercise of power. It is in historic records that in many of western countries there was a period when social disparities were so extreme such that society had to mobilize government mechanisms, through laws, public policies and changes in tax system that saw some degree of redistribution to eliminate the extreme forms of poverty and inequality that existed. However, in Brazil since it was a colony, empire and then a republic it has never had attempts to promote inclusion of the poorest segments of the population. It developed in all of twentieth century with considerable number of extremely poor people. Such development process that ‘manages poverty’ is referred to as a ‘conservative modernization’ by development experts which is model that describe a situation which produces significant changes in the economy without altering established socio-economic order by affecting it slowly. In social perspective, conservative modernization implies several things for instance, lack of regulation in labor market. Nearly more than half of the working population that comprises of about forty five million male and female workers do not enjoy any labor rights such as unemployment insurance, invalalidity insurance cover, paid vacation, maternity and paternity leave, family allowances and pensions. This translates that even though the country belong to the world’s wealthiest counties, it has not ensured formal wages and minimum social protection to many of its workers. Another consequence of social inequalities in Brazil is due to low level of schooling. Universal access to quality education has not given a priority in Brazil. Presently, illiteracy level rates at about ten percent. Subsequently, the average number of years of schooling of the population aged fifteen and above is estimated to be seven percent when it is suppose be legally at least eight years. Despite the fact that there is improvement as observed from the indicators, the quality of education has long way to go. In rural area, the conservative approach is also felt particularly in agribusiness which is found to strengthens the economic power of large landowners while it neglect the unskilled wage-earning labor force and many small farmers that are not incorporated into the prevailing agricultural model. In large cities exclusion process also has taken its toll where major changes in production process and in the appropriation of urban space have synergetic effects. Their effects are reflected in social spatial restructuring processes that seem to enhance the segregation problem or what in other term would rightly be referred to as ‘social apartheid’. In such situation a significant proportion of the population is forced to live not only outside the formal labor market but also without access to proper housing and basic public services that are vital for quality life such as sanitation, education, health care, transport and recreation. Another cause of inequality is regressive tax system that heavily imposes a burden on the consumption and labor while on the other side spares the large capital. The data collected by the Brazilian Institute for Geography and Statistics (IBGE) in 2004 indicated that the tax load for the richest segment of the population who earned more than thirty minimum wages in a month accounts for about twenty six percent of the family income while the country’s poorest workers, for those with income of less than two minimum wages had a tax load which was nearly twice high- about forty nine percent. The worrying thing is that this situation is worsening over time. The same logic is found in spending of social policies that has been systematically diminishing. For instance, a decade ago there was a mechanism that was established that could allow the Federal government to withhold twenty percent of all the taxes and contributions allocated for social actions which mounted to billions of reals that were used every year to ensure the required surplus for paying interest on and repay the country’s debt. This largely contributed to inquality as the wealthiest- public debt creditor, are favored while the assistance provided by the government to the poorer population was reduced significantly. Social inequality does not only confine itself between the poor and the rich but also it is gender and race based. There is exclusion experienced by women and black people that is directly related to sexist and racist phenomena. Gender and race inequalities that has persisted for decades is an indication that individuals continue be discriminated based on their sex or color in spheres of society like in schools, labor market, political circles and family . The consequences of these perpetuated inequalities are perverse in that they make situation to look normal which in turn reinforce the stigmatization of these marginalized groups. This hinders individuals to achieve their potential and also prevents them exercise their right as Brazilian citizens. The exclusion processes that women encounters and the black people that has widened social gap is what has characterizes contemporary Brazil society. Bibliography: Beghin, N. (2008); Notes on Inequality and Poverty in Brazil: Current Situation and Challenges. Retrieved on 8th January 2009 from: http://www. oxfam. org. uk/resources/downloads/FP2P/FP2P_Brazil_Inequality_Poverty_BP_ENGLISH. pdf Brazil Historical Background and Economic Growth (2009);http://www. floridabrasil. com/brazil/guide-about-Brazil-Economy-Historical-Background-Economic-Growth. htm Coatsworth, J. H. (2007); Why is Brazil â€Å"Underdeveloped†; Retrieved on 8th January 2009from:http://www. drclas. harvard. edu/revista/articles/view/934. Hamilton, C. V. (2001); Beyond Racism: Race and Inequality in Brazil, South Africa, and the United States. ISBN 158826002X, 9781588260024Lynne Rienner Publishers. Nathalie B. (2008); Notes on Inequality and Poverty in Brazil: Current Situation and Challenges. Retrieved on 8th January 2009 from: http://www. oxfam. org. uk/resources/downloads/FP2P/FP2P_Brazil_Inequality_Poverty_BP_ENGLISH. pdf Saddi, V. (2008); Lack of Infrastructure Investment in Brazil: A Constraint on Economic Growth; Retrieved on 8th January 2009 from:http://www. rgemonitor. com/economonitor-monitor/253645/lack_of_infrastructure_investment_in_brazil_a_constraint_on_economic_growth Weyland, K. G. (2002); The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela. ISBN 0691096430, 9780691096438, Princeton University Press Wise, C. (2003); Reinventing the State: Economic Strategy and Institutional Change in Peru. ISBN 047211316X, 9780472113163, University of Michigan Press.