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2.1 An Overview of the Brazilian Economy

Major Macroeconomic Indicators





Population (million of inhabitants)




Gross domestic product (US$ billion)




Real GDP growth (%)




Consumer prices (year-on-year % change)




Exports of goods, FOB (US$ billion)




Imports of goods, FOB (US$ billion)




Average exchange rate (Brazilian real per US dollar)




Source: Brazilian Institute of Geography and Statistics (IBGE), MDIC/SECEX, IMF

Brazil, with a population of nearly 190 million, is the largest country in Latin America. The country has a significant agricultural sector, and it is the world’s leading producer of soybeans, coffee, wheat, citruses, bananas and beef. Thanks to the rich endowment of natural resources, as well as the development of a broad-based industrial sector, Brazil is the largest exporter in the region and the 24th largest worldwide. Leading export items include transport equipment and parts, metallurgic products, oil and fuel, mineral ores, and soybeans and soybean products, while leading import items include machinery and electrical equipment, oil and derivatives, chemical products, and transport equipment and parts. Apart from agriculture and manufacturing, Brazil has the biggest financial centre in Latin America. The São Paulo Stock Exchange (BOVESPA) is the largest stock exchange in Latin America, and one of the largest in the world.

Mapped out by Goldman Sachs, Brazil, Russia, India and China are dubbed as the BRIC economies. They are forecast to undergo rapid development, and by 2050 outperform many of the leading economies nowadays. Brazil, which has a per-capita GDP of around US$9,000[1] currently, is predicted to further strengthen its role as a dominant global supplier of agricultural products and raw materials such as soybeans and iron ores. On the industrial front, iron and steel, transport equipment and biofuel will likely become the star performers.

Judging from the GDP growth rates of the four BRIC economies in recent years, Brazil is ostensibly lagging behind the other three economies. Long-criticised bureaucracy and poorly structured taxation system, together with fragmented political environment and corruption, are considered root causes of Brazil’s relatively low economic growth among the other BRIC economies. However, in view of a relatively high per-capita GDP and the Brazilian government’s quest to foment economic growth, this also suggests much potential for growth.

Leveraging on the strong commodity prices in recent years, the Brazilian government has also managed to reduce its foreign debt. In 2007, the ratio of foreign debt to GDP dropped to 15.2% from the peak of 45.9% in 2002. On the other hand, Brazil’s foreign exchange reserve topped US$180 billion, and was ranked seventh in the world as of the end of 2007. Together with other favourable fiscal and monetary policies, Brazil is regaining growth trajectory as well as importance in the world marketplace.

Two Cities in Focus[2]

With 11 million and 6 million inhabitants respectively, São Paulo and Rio de Janeiro are the two most populous cities in Brazil. Not only are they the most populous, but also the most developed cities in Brazil. Therefore, they present the largest consumer markets that Hong Kong traders should be attentive to.

São Paulo

Situated in the southeast region – the richest region of Brazil, São Paulo is considered the “economic capital” of Brazil. Taking the state of São Paulo as a whole, it accounts for more than 40% of Brazil’s total production, and generates more than one-third of the country’s GDP. Inhabited by about 25% of the nation’s population, the state of São Paulo presents the biggest consumer market in Brazil, responsible for more than 30% of the total consumer expenditure.

Owing to its strategic position in Brazil and Latin America, São Paulo has attracted many prominent companies, such as Motorola, Sony Ericsson, LG and Samsung, to set up production facilities there to serve the regional market. The São Paulo state government has launched many initiatives to bolster the local economy in recent years, including the tax-exemption programme “Competitive São Paulo”, which reduces the value-added tax (ICMS) rate for various products such as textiles and clothing.

Apart from industrial production, the agricultural sector accounts for one-third of the state’s exports, with fruits, coffee, sugarcane, beef and forestry products being the staples. São Paulo accounts for about 50% of the world’s citrus juice exports and half of Brazil’s coffee exports. It is also responsible for 70% of the nation’s exports of alcohol and beef.

Riding on the advanced transportation and telecommunications infrastructure, São Paulo has emerged as the most important import-export hub in Brazil, handling more than one third of the national’s total exports and 45% of the national’s total imports. Considered the largest in the southern hemisphere, the port of Santos recorded a 10.6% year-on-year growth in freight traffic in the first five months of 2007. Moreover, the state of São Paulo is home to the largest air freight terminal in Latin America – the Viracopos Airport, and the busiest passenger terminal in South America – the Guarulhos International Airport.

Buoyed by the cluster of over 7,000 banks and the São Paulo Stock Exchange (BOVESPA), the state of São Paulo is considered the banking and financial centre of Brazil and Latin America. Most of the major banks in Brazil, such as Nossa Caixa (the largest state bank), Bradesco (the largest private bank), Itau and Unibanco, are either based or headquartered in São Paulo. Although not headquartered in São Paulo, HSBC maintains a significant presence in São Paulo.

Rio de Janeiro

Bordering the State of São Paulo, Rio de Janeiro is considered the tourism capital of Brazil. Not only does it constitute the second largest market in the country, but it also has one of the highest GDP per capita and the lowest unemployment rate in Brazil. Many distinguished Brazilian companies are headquartered in the state, including Latin America’s largest oil company, Petrobras. Rio de Janeiro is Brazil’s largest oil and natural gas producer, responsible for 84% and 42% of Brazil’s output, respectively.

There are six sea ports in Rio, including Sepetiba, which is considered one of the major ports in the South Atlantic. On the other hand, there are also three airports in the city of Rio de Janeiro, including the most modern cargo terminal (Aeroporto Antônio Carlos Jobim) in Brazil.

The Manaus Free Trade Zone

The Manaus Free Trade Zone is among the largest and most extensively developed free trade zones in Latin America. The Manaus Free Trade Zone is a 10,000 sq km area which includes the city of Manaus, the capital of the State of Amazonas in the north of Brazil. The free trade zone status implies that goods of foreign origin may enter into Manaus without payment of customs or other federal, state or local import taxes.

Since the establishment of the free trade zone, many foreign multi-national companies have invested in the zone. According to the Superintendency of the Manaus Free Trade Zone (SUFRAMA), the free trade zone shelters more than 400 industries, predominated by the electro-electronic industry, which is responsible for over 55% of the industrial revenue. Major electro-electronic products manufactured in Manaus include audio-visual equipment, microwave ovens, cellular telephone sets, computers and peripherals, photocopiers, telephone equipment, facsimiles and other telecommunications equipment, and electronic components. Other than electro-electric products, Manaus also has manufacturing facilities for two-wheel vehicles, watches, optics and toys. Most of the foreign manufacturers import parts and components from abroad, and assemble products for the Brazilian market and re-exports to other Latin American markets. Provided that the products meet the origin requirement, they can be deemed as Brazilian made, and then imported free of import duties.

The procedures for importing goods into the Manaus Free Trade Zone are similar to shipping to other points in Brazil, except that additional licences are required. The issuance of the additional licences is administrated by SUFRAMA. In addition, commercial invoices of Bills of Lading must have “Free Zone of Manaus” and one of the following statements – “Zona Franca de Manaus para Consumo (Manaus Free Trade Zone for Consumption)” or “Zona Franca de Manaus para Reexportao (Manaus Free Trade Zone for Re-export)” printed on them.

For the time being, apart from supplying parts and components, Hong Kong companies are not active in the Manaus Free Trade Zone. New-to-market Hong Kong companies targeting the Latin American market could consider setting up production facilities in Manaus to take advantage of the fiscal incentives and proximity to the market, provided that they have the necessary management capability and financial muscle.

[1] According to IMF, Russia, India and China were estimated to have per-capita GDPs of around US$13,000, US$1,000 and US$3,200, respectively, in 2008.

[2] Please refer to Appendix 1 for a map on Brazil.

Content provided by Hong Kong Trade Development Council
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