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Factsheet
May 23rd 2002
From the Economist Intelligence Unit
Source: Country ViewsWire

Country ViewsWire
Brazil

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FROM THE ECONOMIST INTELLIGENCE UNIT
Population: 174.5m(a) (2001)

Population growth: 1.1%(a) (1997-2001, av)

Land area: 8.51m sq km

Fiscal year: Starts January 1st

Currency R2.36:US$1 (2001, av) R2.47:US$1 (May 9th 2002)

GDP R1,185bn(a) (2001) US$503bn(a) (2001, at market exchange rate) US$1,309bn (2001, at PPP)

GDP growth 1.9% (1997-2001, av) 1.5% (2000)

GDP per head US$2,880(a) (2001, at market exchange rate) US$7,500(a) (2001, at PPP)

Inflation(b) 5.9% (1997-2001, av) 6.8% (2001, av) 7.7% (2001, year-end)

Background

Democratic rule resumed in Brazil in 1985 and a new constitution was ratified in 1988. Fernando Henrique Cardoso was re-elected to a second term as president in October 1998. That term began with a maxi-devaluation of the Real in January 1999, but sound policymaking created the conditions for economic recovery in 1999-2000 as market sentiment towards Brazil improved. Prudent policies have restored macroeconomic stability, but the reform process remains incomplete. Contagion from Argentina and a difficult external environment limited growth and worsened public solvency indicators in 2001.

Political structure

The president executes policy approved by the 513-seat Chamber of Deputies and the 81-seat Senate. Constitutional review is by an independent judiciary. Although the president wields considerable power and can resort to temporary decrees to push through legislation, the provisions of the 1988 constitution give Congress ample capacity to frustrate the executive. The president is elected for a maximum of two terms of four years each.

Policy issues

The government is running a large primary fiscal surplus (which excludes interest payments), but has limited control over fiscal solvency, as three-quarters of domestic public debt is indexed either to the exchange rate or to the overnight rate. Under the supervision of the IMF, Brazil has adopted inflation-targeting as a framework for monetary policy in the context of a floating exchange rate. A new US$15.5bn IMF stand-by facility was endorsed in September 2001 to shore up reserves until the global economy improves. Structural reforms, including privatisation and social security reform, slowed in 2001 as attention focused on other economic and political concerns, and few advances are expected in the remainder of the Cardoso government's term.

Foreign trade

A trade deficit of US$696m and a current-account deficit of US$24.6bn, equivalent to 4.1% of GDP, were recorded in 2001.

Major exports 2000	% of total
Transport equipment & parts	16.6
Metallurgical products	10.7
Soybeans, bran & oils	8.1
Chemical products	7.4
Major imports 2000	% of total
Machinery & electrical equipment	32.5
Chemical products	16.7
Transport equipment & parts	13.7
Oil & derivatives	8.8
Leading markets 2000	% of total	Leading suppliers 2000	% of total
US	24.3	US	23.3
Argentina	11.3	Argentina	12.3
Netherlands	5.1	Germany	7.9
Germany	4.6	Japan	5.3

More economic data

Taxation

Annual corporate profits, including the profits of branches of foreign companies, under R240,000 (US$130,000) are taxed at 15%, while those over R240,000 are taxed at 25%. Net pre-tax profits are subject to a 9% social contribution, which is non-deductible for corporate tax purposes. Depreciation allowances are in the range 4-20%. Capital gains are taxed at 15%. Income tax is not paid on dividends. In 2000 personal income was taxed at 15% on incomes of R10,800-21,600 and at 27.5% on incomes over R21,600. Value-added tax (VAT) applies at rates of 7-25%, depending on the state, product and transaction.

(a) Economist Intelligence Unit estimate. (b) Indice de precos ao consumidor amplo (IPCA, national consumer price index).