Before 1930 the Brazilian economy was dominated by a number of agricultural and mineral products for export. The world economic depression of the 1930s encouraged the government to diversify the economy, particularly through industrialization. The state led much of this development, through economic plans and government participation in key sectors of public services, such as electricity, telephones, and postal services. The government was also directly involved in some of the country’s largest firms, particularly in the mining, steel, oil, and chemical industries. At the same time, it encouraged foreign investment in areas such as automobile manufacturing, engineering, and the production of electrical goods. As a result, the importance of agriculture and mining in output and trade fell significantly.

Despite success in growing its industrial sector, Brazil encountered economic difficulties. Periodic world recessions, the oil crises of 1973 and 1979, the accumulation of high foreign debt, and periods of rapid inflation all contributed to slow the progress of development in Brazil. In response to these difficulties, the government reduced its role in planning the economy and in financing the development of new industries. The government also opened up a number of state-owned companies to private investors in areas such as steel, petroleum, electricity, and telecommunications. In 2001 services accounted for 57 percent of Brazil’s gross domestic product (GDP); industry, 34 percent; and agriculture, forestry, and fishing, 9 percent.

A. Labor

In 2005 the labor force in Brazil was 91.3 million people, of whom 43 percent were women. Unemployment was estimated at 9.7 percent in 2003, but that figure may be imprecise, due to the number of people holding part-time jobs or working in unreported employment, particularly in the cities. Urban-based employment surpasses agricultural-based employment, with much of its growth in service jobs rather than manufacturing. In 2005 the service sector employed 54 percent of the workforce.

The government first granted legal recognition to labor organizations in 1907. In 1931 President Getúlio Vargas created a government-supervised trade union structure. Strikes were forbidden, but labor courts assessed workers’ grievances. The Vargas government also instituted social legislation that was advanced for its time, regulating hours of work and establishing a minimum wage, worker training, and health care. By 1944 there were 800 unions, with over 500,000 members. During the 1950s labor became more militant, and there was pressure for a central labor organization and moves to unionize rural labor.

Following the 1964 military coup, the government purged the leadership of unions and placed many unions under direct government control. However, continued union activism at the factory level and strikes organized by workers were factors in ending the military regime. Unions reemerged following the return of civilian rule in 1985, and central labor organizations were legalized. During the 1990s the number of unions grew into the thousands and included factory and rural workers, employers, and professionals. In addition to umbrella organizations such as the Central Union of Workers and the General Confederation of Workers, both formed in 1983, there are unions for specific industries, such as metal workers, and for sectors of the economy, such as commerce, transport, and education.

B. Agriculture

After the 1930s agriculture declined in importance in the economy and employment. However, today agriculture generates about one-third of export earnings. Brazil’s development of its savannas by improving the quality of its soil with phosphorus and lime fertilizers has made it an agricultural superpower. Brazil is the world’s largest exporter of soybeans and the largest producer of sugarcane and coffee. Soybeans became an important crop after Brazil experimented with developing tropical varieties. Soybeans and coffee are now Brazil’s leading agricultural exports. Sugar output has more than doubled since 1975, partly to meet the demand for cane alcohol as a substitute for gasoline.

Brazil is also one of the world’s largest producers of oranges, bananas, and papaws, a small tropical fruit. In addition to coffee, sugar, and soybeans, the leading crops are maize, various beans, rice, and manioc, or cassava. Cotton, grown mainly in the savannas, is also becoming a fast-rising export. Pastoral farming is also important. There are 207 million head of cattle in Brazil; pigs, sheep, and goats are also important.

There has been considerable modernization in agriculture, through mechanization, the use of fertilizers and irrigation, and improvements in storage and transport. Settlements have advanced into the lands in the Center-West and the Amazon region, via planned settlement schemes and spontaneous colonization. This advance is partly a result of the displacement of farm workers by modernization. Brazil has a large number of landless rural dwellers, and the pattern of land ownership is very unequal.

C. Forestry and Fishing

The forests are an important source of a range of products for domestic use and export. Timber products such as paper and cellulose are important export commodities. Other valuable forest products include açaí fruit; babaçu nut; yerba maté, whose leaves are made into a tealike beverage; piaçava fiber, which is used to make brooms and cords; and charcoal, used largely in the iron industry.

Fish provide a modest contribution to the Brazilian diet. Two-thirds of the catch comes from sea fishing and the remaining one-third comes from inland waters. However, there is a marked contrast between the two systems. Commercial companies take in a majority of the saltwater fish catch, whereas private individuals catch most of the fish in the inland region. Fishing is particularly important in the states of Rio de Janeiro and Santa Catarina.

D. Mining

Minerals are a vital source of industrial raw materials and provide 9.1 percent of export earnings. In 2001 Brazil was the world’s leading producer of iron ore and one of the world’s largest exporters of the mineral. The country is also an important source of gold, tin, and manganese. Iron ore comes from Minas Gerais and more recently from the Serra da Carajás in Pará. Minas Gerais is also a major producer of manganese, bauxite, nickel, zinc, gold, diamonds, and semiprecious gemstones. Carajás has gold, nickel, copper, and the metallic element molybdenum. Other significant minerals are tin in Amazonas, manganese in Amapá, and bauxite, an important ore of aluminum, in Pará. A wide range of nonmetallic minerals are mined, including limestone, dolomite, phosphates, and quartz. Low-grade coal is produced in Paraná, Santa Catarina, and Rio Grande do Sul, but output has fallen by more than half since 1988.

Oil was first discovered in the Northeast in 1939, and in 1953 the government established a state company, Petrobrás, to control production, refining, and distribution of petroleum. The country remained heavily dependent on oil imports until large oil fields were discovered off the shore of Rio de Janeiro in 1974. In 1997 the government ended the Petrobrás oil monopoly and opened the oil industry to competition. New oil fields were discovered near Rio de Janeiro—the nation’s largest oil producer—and off the shore of Sergipe in 1996. In 2001 Brazil was one of the top 20 producers of crude petroleum in the world. Significant oil and natural gas fields have also been found in the Amazon region.

Brazil is also home to Companhia Vale do Rio Doce, a company that ranks as one of the world’s largest iron ore producers and exporters. The Brazilian government had controlled the company but in 1997 it privatized Companhia Vale do Rio Doce as part of an economic plan to raise revenue. Companhia Vale do Rio Doce runs large iron mines in Minas Gerais and a mineral complex in Carajás.

E. Manufacturing

The manufacturing sector has been a key to Brazil’s economic development, with periods of rapid growth, especially in the late 1950s and the 1970s. A major objective of Brazil’s industrialization policy was to replace imported manufactures with Brazilian-made ones. As a result, industry has become highly diversified, including a range of high-technology and heavy industries. This diversification includes such manufactured items as food, drink, textiles, clothing, vehicles, and chemicals. Industrialization involved a mixed pattern of investment by domestic capital; by the government in areas such as steel, petrochemicals, and aircraft; and by foreign capital in the manufacture of automobiles, chemicals, and electrical goods. As a result, Brazil is one of the world’s major steel producers and car manufacturers. The vehicle industry has developed since 1956, with Fiat, Ford, General Motors, and Volkswagen as the largest firms.

The leading industries are machinery and transportation equipment, food and metal processing, automobiles, steel, chemicals, and textiles and clothing. Industry is highly concentrated geographically, with the leading concentrations in metropolitan São Paulo, Rio de Janeiro, Campinas, Porto Alegre, and Belo Horizonte. Technologically advanced industries are also highly concentrated in these locations.

F. Energy

Most of Brazil’s energy comes from renewable sources, particularly hydroelectricity, which generated 84 percent of the country’s energy in 2003. Oil and natural gas are the main nonrenewable sources, followed by coal. Renewable resources are domestically produced, but Brazil also imports about 10 percent of its total energy needs, principally oil and coal.

Almost half of the hydroelectric capacity is located on major rivers in the Southeast, close to the highest concentrations of population and industry. Improved transmission technology and the construction of industries, such as metal smelting, that use large amounts of electricity have begun to tap into the considerable hydroelectric resources of the Amazon region. The biggest hydroelectric station is Itaipú, in Paraná, which Brazil shares with Paraguay. Other large stations are Tucuruí in the Amazon region, Paulo Afonso in Bahia, Itumbiara in Minas Gerais, and Ilha Solteira in São Paulo. In the South, burning coal supplies thermal power, and there are oil-fired power stations elsewhere. Brazil has taken some tentative steps in the production of nuclear power; in 2003 nuclear power provided 4 percent of Brazil’s energy.

Wood and charcoal are still widely used in rural areas for cooking. They are also important commercial sources of energy, particularly in iron smelting and lime making. Sugarcane is also significant, both as a source of commercially distilled fuel known as ethanol for motor vehicles and as bagasse, the remains of crushed sugarcane stalks, which is used as fuel in sugar mills. From 2003 to 2006, more than 77 percent of the automobiles sold in Brazil, about 2 million vehicles, were flex-fuel cars, which operate on either ethanol or gasoline.

G. Foreign Trade

Before 1980 there were persistent deficits in Brazil’s balance of trade, with imports costing more than exports. In the 1980s this moved into a surplus as a result of a policy of export promotion, increased self-sufficiency in manufactured goods, and a reduced need for petroleum imports. Trade deficits returned in the 1990s partly due to a global economic stagnation. By the beginning of the 21st century, Brazil had reestablished a trade surplus. Although Brazil traditionally has been an exporter of primary agricultural and mineral products, manufactured goods made up 53 percent of Brazil’s exports in 2004.

Brazil is a member of the International Monetary Fund (IMF), an international body that seeks to coordinate monetary funds in order to expand trade, and the Inter-American Development Bank, an organization headquartered in Washington, D.C., that promotes economic development in Latin American nations. It was a pioneer in the International Coffee Agreement of 1957, seeking to protect its interests in one of its major export crops. By establishing export quotas, the agreement between coffee-producing and coffee-consuming countries tried to stabilize prices and overcome the problems caused by fluctuations in supply and demand. In 1960 Brazil joined the Latin American Free Trade Area (which became the Latin American Integration Association in 1980), to foster trade within the continent, and since 1995 has been a member of Mercosur, a customs union with Argentina, Paraguay, and Uruguay.

H. Currency and Banking

The country’s economic difficulties in the early 1990s resulted in frequent devaluations of the currency along with frequent name changes to the unit of currency, including cruzeiro, cruzeiro novo, and cruzado. The present currency is the real, which replaced the cruzeiro real in 1994, and has approximate parity with the U.S. dollar (2.40 real equal U.S.$1; 2005 average).

The Banco de Brazil is the largest commercial bank, established in 1808. In 1965 the Central Bank of Brazil became responsible for the supply of currency and the control of circulation. In addition to the federal bank and private banks, there are a number of state banks.

The largest stock exchange is that of São Paulo, followed by the exchange in Rio de Janeiro. There are a number of smaller exchanges.

I. Transportation

Sheer size, mountains, and river rapids have all been obstacles to transportation in Brazil, but the country has an expanding transport network. Roads are a key element, encouraged in the late 1950s by the implementation of a national highway plan and the creation of an automobile industry. A national highway system with Brasília at the center links all the state capitals. There are other major interurban and interregional highways, including the Trans-Amazon Highway, an east-west artery linking isolated regions of Brazil and Peru. Dependence on motor vehicles has created serious traffic congestion in some of the major cities, especially those on sites with limited geographic access, such as Rio de Janeiro. It has also resulted in increased air pollution.

Two-thirds of the tracks on Brazil’s railway system are located in the Southeast and South. Railways have suffered because of their high costs compared to the highways and because they were built as separate lines, rather than as an integrated system. Many of these systems have variations in track gauges (the distance between the two sides of the track); this makes it impossible to run trains designed for one system on the tracks of a system built for a different gauge. In 1962 a federal agency was created to oversee the state-controlled railways. These and the railways of São Paulo are the largest systems. The remaining rail operations are suburban commuter systems connecting in the major cities or specialized railways carrying minerals, timber, or tourists.

Coastal shipping has also declined in the face of highway competition, but there was some modernization in shipping and ports in the late 1970s through the creation of export corridors to the ports of Rio Grande, Paranaguá, and Santos, and through the construction of specialized oil and ore ports. Major ports include Santos, Rio de Janeiro, and Angra dos Reis; the specialized ports of Tubarão, Sepitiba, and São Sebastião in the Southeast; Paranaguá and Rio Grande in the South; and Aratu and São Luis in the Northeast.

Brazil’s large size makes air transport important. Sixty-seven airports, controlled by the state company Infraero, handle most of the air traffic. There are also many small airstrips that serve remote areas in the Amazon region. The airports of São Paulo and Rio de Janeiro are the two largest in South America in terms of traffic handled. Varig is the principal international and domestic airline, with Vasp and Transbrasil as the leading domestic carriers. Several sectors of the transport system—including railways, metro systems, highways, ports, and airports—were opened to private investment in the 1990s as part of the government’s privatization program.

J. Communications

Major newspapers are based in Rio de Janeiro and São Paulo. There are six major television networks, with Globo Organisations, one of the biggest media organizations in Latin America, controlling a major television, radio, publishing, and newspaper business. Brazilian telenovelas (soap operas) have become an important export to other South American countries and to Europe. Telecommunications is a growing sector, with rapid expansion of cellular phones and cable subscriptions.

K. Tourism

Tourism brings in substantial foreign exchange. Brazil’s increased affluence and improved transportation facilities have greatly increased tourist activity. In 2005, 5.4 million tourists entered Brazil. South America is the major source, followed by Europe and North America. The leading individual countries are Argentina, the United States, Uruguay, Paraguay, and Germany. Major tourist attractions are the beaches of Rio de Janeiro, the historic cities of Bahia and Minas Gerais, and natural formations such as the waterfall at Iguaçu. The yearly Carnival festival in Rio de Janeiro also attracts large numbers of tourists. In recent years the beaches of the Northeast have become important attractions, and the rain forest has begun to attract ecological tourism.

In the early 1990s the volume of visitors fell because of press reports of crime in cities such as Rio de Janeiro and Salvador. However, foreign tour operators recognized Brazil’s potential, and the government began to stimulate the industry. In 1992 the government tourist agency, Embratur, began to improve the infrastructure for tourism, particularly hotels and transport, and sought to increase the marketing of Brazil overseas. In addition to overseas tourism, rising prosperity within Brazil has also stimulated domestic tourism.

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