Assignment
Temperature: We're talking about its economy, which has been growing at a heated pace. In 2010, the country's GDP grew by 7.5 percent. That's a growth rate developed countries such as the United States haven't experienced for years, if not decades. Although Brazil's growth rate slowed considerably in 2011 and 2012 due to the global economic crisis, it has fared better than many other nations. Recently it surpassed the United Kingdom as the sixth-largest economy in the world. Why has Brazil done so well economically? Increased world trade is one reason why. The country has an abundant amount of natural resources firms in other countries around the world are eager to buy-especially companies in the fast-growing nation of China. Greater exports have also helped 40 million Brazilians rise up out of poverty and into the middle class. Their massive spending power is creating new markets for multinational companies ranging from McDonald's and Whirlpool to Nestlé, Avon, and Volkswagen. Brazil has become Avon's largest market. Volkswagen now sells more cars in Brazil than it does Germany, where the company is headquartered. "China may have over a billion inhabitants, but Brazil has 200,000 consumers," explains Ivan Zurita, the president of Nestle's Brazil division. Clouds on the horizon threaten to cool off Brazil's growth, however.
To begin with, the country is concerned that its trade with China is out of balance. Although China purchases more natural resources from Brazil than any other nation, it doesn't purchase near as many manufactured goods from Brazil as it exports to it. A bigger issue is the appreciation of Brazil's currency, the real. Massive amounts of money have been flowing into Brazil to take advantage of the nation's high interest rates and growth opportunities. This has increased the demand for the real, causing its value to rise by nearly 50 percent relative to other currencies. The good news is that the stronger real has made imported products cheaper for Brazilians to buy. The bad news is that products made in Brazil have become more expensive for the rest of the world to purchase, slowing the country's exports and growth. Businesses in Brazil have lobbied the government to weaken the real so their products are better able to compete against imports. Their efforts appear to have paid off. Recently, Guido Mantega, Brazil's minister of finance, said the country will take steps "as needed" to weaken the real.
The government has also imposed tariffs on a number of imported products, including cars, shoes, chemicals, and textiles, and signed a trade deal with Mexico that put a quota on the number of automobiles imported from that country. Imports and the value of the real are not the only clouds threatening Brazil, though. Businesses in the country face a great deal of bureaucratic red tape, heavy regulations, and tax rates that are some of the highest in the world. To deal with these problems, Brazilian President Dilma Rousseff has announced that her administration will eliminate payroll taxes for employers in industries hardest hit by imports. To further ease the nation's growing pains, Brazil's development bank, BDM, will subsidize business loans to boost the production of many products, including tablets and off-shore oil rigs.
The goal is to stimulate technological innovations that will enable manufacturers to produce higher-value products so Brazil doesn't have to rely on natural resources to fuel its growth. "Look, a government isn't made on the second or third day," Rousseff has said about her administration's incremental efforts to keep Brazil's emerging economy moving forward. "It's made over time. Things mature.
Questions
1. Do you think the efforts of Brazil's government to keep the economy growing will be successful? Why or why not?
2. What downsides might Brazil experience by implementing quotas, tariffs, and measures to devalue its currency?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.