Beyond GDP: Dissecting Brazil’s Economic Success

July 12, 2012


In late 2011, economists from London’s Centre for Economics and Business Research (CEBR) announced that Brazil had surpassed the United Kingdom to become the sixth-largest economy in the world. The announcement was celebrated in Brazil and attracted attention across the globe. “Brazil Overtakes UK as Sixth-Largest Economy,” announced the U.K. Guardian on December 25.1 CEBR chief executive Douglas McWilliams, in a press release the following day, wrote: “Brazil has beaten the European countries at soccer for a very long time. But beating them at economics is a new phenomenon.”2

Despite the hype, the trend had been expected since 2009, when Brazil surpassed Spain to occupy the eighth position and in 2010 when it passed Italy, placing it in seventh place. There are some forecasts that it will surpass France in the next few years and occupy the fifth position. Moreover, Brazil’s recent ranking is not surprising, given that the standard measurement of a country’s economy, gross domestic product, is directly related to the country’s natural resources, industrial capacity, and the size of its territory and population. Brazil is known for its abundant natural resources, has reached a significant degree of industrialization over the past decades, and is the fifth-largest country on the planet, both in territory and population. Thus it should be expected that Brazil would soon become the world’s sixth-largest economy.

That said, a GDP measurement does not offer the most illustrative picture of a country’s true social and economic situation. This is particularly true when considering the population’s quality of life. The simple fact that Brazil’s GDP alone is smaller than those of the United States, China, Japan, Germany, and France is not so significant. A better picture of a country’s economic performance is provided by calculating its GDP per capita, that is, by dividing GDP by the population. Per capita GDP is often used to compare the economic strength of countries based on their distinct populations. With this methodology, Brazil falls from sixth to 53rd, based on IMF data for 2011.

Another commonly used indicator to undertake this type of long-term comparison between countries is the Human Development Index (HDI), which combines per capita GDP with health and education indicators. The index is composed of three variables: per capita GDP, infant mortality, and the literacy rate. According to this methodology, Brazil falls even farther, to 84th.3

It is simply not enough to look at GDP growth. Although it is one important indicator in analyzing a country’s economic strength, it gives us a limited picture by itself. How equitably income is actually distributed and to what extent quality of life is improving gives us a more realistic panorama of a country’s economic performance and the social impact of economic variables.

Even if we only analyze GDP growth, however, Brazil’s achievement is not very remarkable. While its economic growth has been above that of the richest countries—enabling it to surpass the United Kingdom—it has remained below that of its Latin American neighbors and other emerging economies, such as its BRICS peers: China, India, Russia, and South Africa. If we consider the three-year period of 2009–11, Brazilian GDP grew only 9% in real terms.4 However, during the same period, China grew 31%, India raised its GDP 27%, and the countries of South America together grew 13%. If we take the period 2003–11, Brazilian GDP grew 40% in real terms, while China grew 138%, India grew 103%, and Russia 50%.5 It is also possible that even this Brazilian growth may not be sustainable.


Brazil’s recent economic success is at least partially due to the government’s response to the 2008 international financial crisis. As the crisis engulfed the United States and Europe, in 2009 the government of Luiz Inácio Lula da Silva and his finance minister, Guido Mantega, temporarily reoriented Brazilian economic policy along Keynesian lines, adopting counter-cyclical measures—public expenditures were embraced, public banks were directed to step up their lending as private credit dried up, and some sectors even began to receive subsidies. The Brazilian Development Bank (BNDES) offered special loans with reduced interest rates, while tax exemptions or reductions were offered to the agribusiness, automobile, and construction sectors. But the most important policy was to maintain minimum-wage increases and social security retirement benefits. Both continued to rise slightly, with rates readjusted to just above inflation.

Together, these measures largely prevented the economic woes that befell the world’s more developed nations from afflicting Brazil. They guaranteed the stable income of the domestic consumers’ market, and Brazil’s economy remained reasonably solvent during the crisis. Since 2010, however, the government has failed to take advantage of the opportunity created by the international crisis to promote a more lasting and effective change to its economic policy. In short, Brazil has abandoned its Keynesian policies and returned to its pre-crisis model. The official interest rate was increased, most of the subsidies were ended, and the government again turned its efforts toward obtaining a high primary surplus in the federal budget, with cuts to social expenditures.

The dynamic pillars of growth continue to be the financial sector and the primary export sector (oil, iron ore, and agribusiness commodities). The competitiveness of Brazil’s most important industrial sectors continues to be severely reduced and the country is passing through a dangerous process of deindustrialization. Almost all industrial sectors are reducing their share in economic activity. This reality has largely been the result of Brazil’s exchange-rate policy.

Since the implementation of the Real Plan, the Brazilian government has had a floating exchange rate, which is set according to the supply and demand of foreign currency. With this, the government has given up an important economic policy tool. Meanwhile, the market is controlled by only a few large financial institutions. With consistently the highest interest rate in the world, Brazil’s financial market has always been attractive for international speculative financial resources. As a result, the domestic capital markets have been flooded by external resources, and the exchange rate has increased in relation to the U.S. dollar and the euro.

Under these conditions, the Brazilian currency, the real, now finds itself artificially inflated, seriously harming the export of manufactured products and excessively stimulating the import of manufactured goods, primarily from China. With this picture, there is a great deal of uncertainty in Brazil’s ability to spur the construction of new factories, as the country loses this historic opportunity to step up to construct a model of sustainable development that is more autonomous and less dependent on international economic variations and the decisions dictated by foreign companies.



Paulo Kliass is an economist and columnist for the Brazilian online magazine Carta Maior ( This article was translated for NACLA by Maureen Turnbull.



1. Phillip Inman, “Brazil Overtakes UK As Sixth-Largest Economy,” The Guardian (London), December 25, 2011.

2. Centre for Economics and Business Research, “Brazil Has Overtaken the UK’s GDP,” press release, December 26, 2011.

3. United Nations Development Programme, “Human Development Report 2011: Human Development Statistical Annex,” available at

4. The Brazilian Central Bank, available

5. Trading Economics, “GDP Growth Rates, List by Country,” available at


Read the rest of NACLA’s Summer 2012 issue: “Latin America and the Global Economy.”



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