Brazil is considered to have the eight largest economies in the world as per the nominal gross domestic product, while in terms of the purchasing power parity it is considered the seventh largest. It is the largest economy in Latin America and the second in the western hemisphere. Brazil was ranked among the fastest growing economies in the world among the major ones from 2000 to 2012. Its growth rate in terms of GDP was estimated at 5% with its economy as at 2012 surpassing that of United Kingdom. However as from 2013 the growth of Brazil’s economy has been decelerating while it did not have any liquid growth in 2014. Economists expect that its economy would grow this year by approximately 1.8% (Barbosa, 9).
This paper purposes to study the economic trend of Brazil before during and after the world economic crisis. This would be through studying various elements of the economy including; business cycles, unemployment, inflation and the economic growth. The paper will compare data and statistics from various sources to establish whether the government manipulates data so as to appeal to the external investors.
The Brazil economy is characterized by an inward oriented economy and moderately free markets. The economy generates the highest GDP from the service industry which produces 67.0%. The industry sector follows with an approximate of 27.5% while the agriculture is at 5.5 percent of the GDP as at 2011. The work force is estimated at 100 million, 71 percent working in the service sector, 19 percent in the industry sector and 10 percent in the Agricultural sector. The GDP of Brazil is estimated at 1.903 Trillion U.S. dollars according to 2015 estimates, unemployment rate stands at 7.3% as at December 2013 and inflation rate is at 7.03 as at June 2014 (World Bank Group).
An economic growth of a country is measured through analyzing the growth Domestic Product (Michael et. al, 17). Therefore to understand the economic growth of Brazil we ought to understand the Gross domestic product rate.
Over a decade, that is from1999-2008, before the global crisis, Brazil had a GDP growth rate of 3.4% on average annually. This growth rate was attributed to the demand for the commodities of Brazil across the world. As from 2008 the Brazil’s economy shrank by 0.3% in 2009. This was the effect of the crisis as the foreign credit warned and the demand for Brazilian commodities in the global market decreased drastically. However Brazil was able to rebound strongly as from 2010, registering the highest growth in the last 25 years of its History this was recorded at 7.5%. As from then, the growth rate began reducing to an average of 2.1% per annum from2011 to 2013 (IBGE).
Diagram1. Annual variation of gross domestic product (GDP) in %.Source: Brazil Institute of Geography and Statistics.
According to World Bank report on Brazils GD it indicates that Brazil after the crisis had a 7.5% growth rate. However the growth rate slowed down as from then over 2011 and 2012. The GDP decelerated to 2.7 percent and to 0.9 percent in 2011 and 2012 respectively. In 2013 it had a GDP growth rate of 2.5%, therefore having an average growth rate of 2.03 percent (World Bank).
This is the aggregate trade, services or production over a number of years or months in a market economy. It is measured by movements of the GDP upward and downward, that is, the contractions and expansion in the economic activities level. Therefore the statistics used in this level is the same as the ones used in the discussions above on the economic growth.
Currently the inflation rate of Brazil’s economy is at 8.08 percent as at March 2015. Before the global financial crisis Brazil had an inflation rate of 6.88% in 2006. The inflation rate decreased significantly to an historic 3.64 percent in 2007 and increased thereafter to 5.67% per annum in 2008 respectively. In the year 2009 the inflation rate reduced to an average of 4.90 percent per annum. In 2010 it increased to 5.04%, in 2011 it further increased to 6.63% while in 2012 it decreased to 5.04 percent per annum. This shows that prior to the global crisis the inflation rate of Brazil was not stable, however during the crisis it was fairly stable at 5%. In the following years after the crisis it has been fluctuating (IBGE).
Diagram 2. Brazil inflation Rate
Source: Trading Economics.com
According to the World Bank reports Brazil’s inflation rate as at 2006 was at an average of 6.2% per annum. In the year 2007, and 2008 it had an average inflation rate of 5.9 percent and 8.3 percent per annum respectively. In the year 2009 it recorded an inflation rate of 7.2 percent per annum. In 2010, 2011 and 2012 it recorded an average of 8.2%, 7.0% and 4.9% each year respectively. The inflation rate trend according to the report from World Bank shows fluctuations since and it indicates that there was no much effect on inflation by the crisis (World Bank).
In comparison we can see that there are huge disparities from the report of the World Bank and that of the government institution IBGE. From the line chart, significant difference in the rate of inflations is evident between the years 2007 to 2010. As much as there is difference in the year 2006, 2011 and 2012 it is insignificant. To be noted is the fact that the statistics from the IBGE are lower than that of the World Bank except of the year 2006. However in spite the huge differences the two statistics reveals that there has not been much effect of Inflation rate before during and after the global crisis. Brazil has had an instable fluctuation rate over the decade.
The unemployment rate in Brazil as at February 2015 was at 5.90 percent up from 5.30 in January 2015. The unemployment rate is derived from the statistics of the people not working but had made an effort to search for employment and they are available. The unemployment rate in Brazil is co-ordinate by IBGE. The comparison is done between the statistics provided by IBGE and the World Bank.
According to the IBGE report the unemployment rate of Brazil in the year 2006 was at an average of 9.9 percent per annum. In the year 2007 and 2008 the unemployment rate was recorded to be at an average of 9.3 and 7.8 percent per annum respectively. In 2009 it increased to 8.1 percent while in 2010, 2011, and 2012 the unemployment drastically reduced to an average of 6.7%, 6.0% and 5.6% per annum respectively. Over the years the unemployment rate of Brazil has been reducing except of 2009 when it increased as a result of the global crisis. However, after the crisis the unemployment rate has been decreasing drastically to as low as 5.65 in 2012 (IBGE).
Diagram. 3. Unemployment Rate
According to the statistics from the World Bank the unemployment rate of Brazil as from 2006 has been decreasing except 2009 when it increased due to the global crisis. In the years 2006, 2007 and 2008 the World Bank shows that the unemployment rate of Brazil was at an average of 8.4, 8.1 and 7.1 percent per annum respectively. In 2009 it increased from previously recorded 7.1% to 8.3% per annum. Over the following years that is, 2010, 2011 and 2012 it recorded an average employment rate of 7.9, 6.7 and 6.1 percent per year respectively (World Bank). This has shown the same trend as it is with the IBGE report.
In comparison, according to the chart is evident that the statistics from the IBGE shows that the unemployment rate of the country has been decreasing and the global crisis effect was not that high in affecting the unemployment rate. Also we can deduce that the rate of unemployment has been reducing rapidly according to IBGE. The graph shows that according to IBGE Brazil unemployment rate responded immediately after the crisis with drastic decrease. On the other hand the World Bank shows a fairly different picture. Form the graph it is depicted that the unemployment rate of Brazil has not been that rapid as depicted by the IBGE report. Further it indicates that the country was unemployment rate was hit by the global crisis. However it did respond after the crisis and the unemployment started decreasing again but steadily.
Form the analysis above it is evident that there is difference in the economic statistics posted by the Government agencies of Brazil tasked with the National Accounts in this case the IBGE and the World Bank. This is very evident in the statistics of Inflation and that of the unemployment rate where the difference was extremely significant. If asked the question do governments manipulate data to be appealing to the investors? My argument would be yes. Investors would be willing to invest in regions where the inflation rate is low and fairly stable. Form the results of the IBGE it is evident that the inflation rate is being forced to be fairly stable as compared to the statistics of the World Bank, refer to Fig. 3. Unemployment rate shows the level of development of a country. On the other hand investors are willing to invest in regions where there is high development. Therefore by appealing to the investors that there is a rapid decrease in an unemployment rate meaning that there is high development rate would attract them. Indeed from the discussion above, there is an indication that the governments do manipulate data to be appealing to the external investors.
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