Globalization in Brazil Essay

Globalization undoubtedly is the current prevailing world economic trend. A large majority of the countries adhere to the tenets of globalization. Globalization literally entails international economic cooperation achieved through the integration of different countries. It envokes the process of intermingling the different aspects of a country’s economy, politics, society, culture and technological forces together with the other participants of globalization. Globalization also creates a link towards the infusion of the local and national economies to create an international market economy, which is done by setting up means for capital inflows, reducing tariffs to give way to trade and foreign investment, migration and even technology sharing. The term globalization was first used during 1980s, though its concepts were not as pronounced as it is until the later parts of 1980s and 1990s. However, traces of the concepts globalization can be dated back in the early centuries, as seen in the ancient discoveries of new colonies and lands. There are three waves of globalization, the first wave which took place between 1870 – 1914; second wave during 1945 – 1980 and the third wave from 1980 until the present. The first wave of globalization was triggered by the decrease in transport costs, which enabled countries to quickly and cheaply transport their products. This had significantly increased export share in the world income. In addition, migration resulted to the influx and increase of labor force, which reached 10% of the total world population. However, though there was a significant increase in the trade and labor force during the first wave of globalization, there were still problems with regards to trade and services that surfaced in the global economy. These problems were due to the implementation of several policies like economic protectionism, which hindered the spread of internationalism amongst countries (Silva, pp. 4-5). Despite the impetus caused by economic nationalism, on the eve of the second wave of globalization, countries were persuaded back towards international cooperation. Hence, trade barriers that were previously imposed were reduced. At this point, trade was doubled relative to the world income. In addition, specialization within countries greatly helped in the achieving interdependence among countries, thus increasing world income. At the end of this period, in contrast to the first wave of globalization, the second wave brought in equity amongst countries (Silva, pp. 6-7. ) And lastly, the third wave of globalization took event during 1980s. This wave had been specially distinctive among all the turns of globalization. It was triggered by the recent advances in communication and transport, coupled with the choice of more advanced countries to seek for new investment opportunities and completely open their economy towards the international market and trade (Dollar, n. p). Moreover, during this period, a large number of developing countries had advanced to power, breaking into global markets; while on the other hand, there was a significant increase of marginalized countries suffering even greatly from declining national income thus increasing poverty in the area (Silva, p. 7). As such, there had been a variety of reasons on how globalization affected the processes in each country. However, the most encouraging effect it wavered upon the developing countries is that it significantly hastened labor abundance which gave national economies a highly competitive advantage in the manufacture and service industries (Silva, p. 8). This in turn benefited some of the countries and was able to keep pace with the advancing world. The newly industrialized and developing countries started breaking into industrial markets capitalizing on infrastructures, technology and other means of production needs. This resulted to a relatively high rate of increase in the Gross Domestic Product (GDP), which is the current determinant of a country’s economy success rate. Further, most of these developing countries increased their incomes by 104% since the start of 1980; though the rest of other countries who weren’t able to keep the pace were left staggering behind (Silva, p. 10). The world economy has indeed seen the effects of globalization on two sides: positive effects for the developing countries who were kept on tide by the benefits of policies imposed upon by the proponents of globalization; and the other, the immediate victims of these policies suffered within the less developed countries who weren’t able to keep abreast with the changes. Brazil was one of those who benefited the era of globalization, but as such they have been victims at first. Consequently, recent developments have proven that while globalization presented certain benefits for Brazil, Brazil has quite not been able to enjoy the expected benefits from it. Brazil: On a Staggering Start There had been crisis that had risen out of the emerging influence of globalization which created a great impact among the countries that played afar according to its calls. Brazil in 1999, was one of the countries to experience the adverse effect it had on world economy, but were able to pick up from the slump that it caused (Silva, p. 8). One of the difficulties that Brazil faced amidst the emergence of globalization was the crisis in capital. Brazil had used a pegged currency, which had put them in a crisis of fiscal and external debt. And though Brazil had tried to adopt a more responsible fiscal policy, their enormous debt teamed with low export and GDP and overvalued currency, all resulted to a capital crisis in 1999 (Silva, p. 20). Though Brazil was expected of becoming one of the successful countries developing during this era, they didn’t perform at the same rate expected of them. Though Brazil possessed clear indicators of progress, Brazil, economically did not perform the development anticipated from it. The period between 1980 – 1990 was known to be a â€Å"lost decade† for the Southern Americans, Brazil in particular. Wherein, during this era, per capita output was negative 0. 6% in a year, which has comparably decreased from the 3. 6% performance during the previous decade (Fraga, n. p). Hence the main difficulties suffered by Brazil at the start of 1980 were due to the series of unsuccessful plans at trying to curb inflation. The main reason behind this failure can be attributed to the fact that the development model used by the military government on Brazil was based upon cheap oil resources and capital, coupled with the inability of such policies to address the other basic necessities like having a sound fiscal and monetary policies. Let alone was that their development started from the capital crisis they suffered in 1999. As result they had to endure high debt and insufficient supply of oil due to high prices. Hence their effort of generating trade surplus to cover up for it then resulted to a high inflation rate (Fraga, n. p. and Silva, pp. 20-22). Brazil: On the New Start In the 20th century, Brazil made a significant progress and was among the best performing countries in the century. Brazil was among the top 12 emerging markets that experienced massive increase in the capital inflows, whose GDP increased to as much as 22%, contributing greatly in the world economy. Accordingly, alongside the increase in capital inflows, technology greatly improved thus making an entrance towards the international market a lot easier (Silva, p. 12). Brazil in case had developed EMBRAER. The existence of such company marked their willingness to compete in an open trade and investment. This equipped Brazil with an oligopolistic or monopolistic nature of a company, possessing highly advanced technology that soared above the standards of their products, thus bringing in heaps of profits for their economy (Silva, p. 18). Consequently, this had widely created a positive impact on overall growth of their investments. More so, at the start of 1990, Brazil started to liberalize their economy. Brazilian leaders opted to negotiate and redefine their economic policies to keep pace with the globalization trends (Langevin, n. p). They lifted trade barriers, import tariffs and quotas, and adopted reforms both economic and administrative ones. These policies included fixing the Brazilian currency to dollars, which helped put inflation at a halt. Economic reforms were done such that these were geared towards being more market-driven, highly flexible, with a more decentralized economic environment. In this regard, they transformed old provisional measures into creating a single trade law which was meant to make a more transparent set of policies that can speed up the process of making reforms and laws. Accordingly, this kind of reforms also allowed an economic policy geared towards favoring exports rather than producing own their own products for their country (â€Å"Brazil: November 2000,† n. p). Another step they took was implementing an austere fiscal policy and privatizing several companies, all of which were consistent with liberalizing their economy. Thus, although Brazil experienced several high inflation rate in the past years, and that most of their GDP was wasted with the inflation of goods and services; nonetheless, their per capita income had increased by a third from the last decade. Hence, after experiencing years of economic recession, Brazil recovered and started a fast growing cycle in the 1990s (Silva, pp. 40-41). Consequently though, expectators attributed the improvements in the Brazilian economy towards their inclination for liberalizing their trade and market activity. Through these changes that Brazil implemented in their economic policies, their economic activity fairly improved and they achieved their prospect growth for year 2000. Several factors that contributed to this growth which they attributed to liberalizing trade relations are as follows: (1) inflation has been pegged within the government target of 8%; (2) foreign direct investment (FDI) significantly increased from its usual value in 1996; (3) trade and GDP has been kept at stable 20%; and (4) Brazil remained to be the largest exporter of some widely used agricultural products. However, there were several economic slumps again experienced by Brazil. The outbreak of Asian crisis in 1997 forced the Brazilian currency to devalue to keep the inflation low. But nonetheless, Brazil was fast to recover and started growing again by the year 2000. Consequently new policies and austerity programs that the Brazilian government adopted kept them at pace of development. These programs had better kept them away from experiencing the economic slumps they had in the previous years. More importantly, these kept them away from acquiring debts and helped stabilize the ratio of debts to GDP. Moreover, to speak of progress is to speak of the quality at how the citizens lived comfortably within their mother country. Hence, the United Nations’ measure of Human Development Index (HDI) in Brazil widely soared up within the past 26 years. That even though the increase in national income cannot suffice alone to the improvement of the country as a whole, the poverty level in Brazil decreased significantly, and education and proper healthcare had well been provided among the Brazilians. The young Brazilian population had become highly educated, with more children being enrolled in schools, and ensuring that the Brazilian safety net always kept abreast with their population through the government’s initiative on providing their citizens with an apt nutrition program. In addition, social integration and cooperation amongst different ethnicities is an indicator of social progress. More so, Brazil also made great improvements in the field of political stability. The establishment and strengthening of a democratic system in the country is a well indicator of the country’s leaders to provide the general public a sense of working and legitimate judiciary and legislative system. However, given these factors and internal growth that Brazil has experienced over the past decades, in comparison to other neighboring countries Brazil’s economic performance is still insufficient and is still lacking to what is expected of them. Although the poverty rate of Brazil has signifcantly decreased over the past two decades, from 40% in 1970s to 36% in 2000, poverty rate in Brazil is still high in comparison to other develping countries (Mario and Woolcock, p. 2). The Brazilian Action In a nutshell, though the Brazilian economy presently comprises one third of the total Latin American production through the large conglomerates of various sectors such as mining, oil, iron and steel, and manufacturing, their economic growth is still less of what was expected of them. Given what seems to be like a hegemonic existence within their region, their growth rate remained below the average expectation. And contrastingly though, Brazil lagged behind Chile, Venezuela, Argentina and Peru. Though the Brazilian economy has seemed to be able to progress within the past years, their performance still has not reached the full blast. They have not yet enjoyed the full outcome of a rich economy. And consequently, the benefits that they get from a globalized economy is yet to be sufficient to call it successful (Luchino, n. p). Fixed capital product has greatly hindered the potential growth for Brazil. Fixed rates have been used to control inflation, however, as a result it limited Brazil’s opportunity to grow simultaneously at the same rate as that with other developing countries. Nowadays, the economy of Brazil is expected to complete a very competitive cycle. Their external and public debts had been declining, their GDP continues to be strong and growing, there have been significant increase in the export and as well as a positive trend capital inflows. Thus in analyzing the growth of Brazilian economy, the adversaries they suffered during the third wave of globalization were due to the fact that they were highly indebted with their economy limping from high inflation rates. More so, they had policies that weren’t appropriate to equip them within a fast paced economy that globalization is holding. Hence, at the event that Brazil started to liberalize their economy and open up their market towards the international market, and changed most of its economic policies to suit the needs for an international market competition, they at least were able to give birth to a new start as an international player. Indeed, though the Brazilian economy made a significant advancement towards microeconomic stability since being able to adopt helpful reforms in the 1990s, still, the pace at which their economy is growing is a matter of great concern. As such, compared to other countries and competitors which developed simultaneously as Brazil had in the past decades, Brazil is still trailing behind. To be able to reap the full benefits that a globalized world promises, Brazil must be aware of certain measures to ensure their success. First, debt management should be given extra attention. Analyzing the economic status of Brazil would suggest that Brazil is still highly indebted. Thus a more appropriate debt management policy should be adopted which will in turn be reflected with the country’s projected GDP growth as well as the other economic indicators. Second, Brazil’s trade policies should be kept more open towards the international economy. Presently, Brazil’s trade is still relatively closed. Their exports account to 13% of their GDP and 9% for their imports, which is comparably low for international standards. Thus, Brazil must work more on keeping these lines open to create a bigger space for their trade rate to grow. Finally, among the aspects that Brazil should work on is their infrastructures. As the means of transportation is highly significant for the growth of a country, Brazil shouldn’t leave this aspect of country’s growth in poor condition. More investments should be made to improve transportation, as well as increase their country’s interest on developing energy generating infrastructures (Silva, pp. 43-46). Furthermore, wherein economic growth is an interplay of physical resources and human capital, aside from the financial and monetary aspects, there are still six other important areas that Brazil should prioritize for them to be able to reach the full blast of their economy. These are: (1) enbaling an environment conducive for learning and growth; (2) creating wider array for knowledge creation and commercialization; (3) acquisition of knowledge from more advanced countries; (4) advancement and proper dissemination of technology; (5) improvement in the basic education; and (6) giving priority to tertiary education (Rodriguez, p. 4). Thus, for Brazil to reach the full potential of their country, they must utilize not only the raw and fixed natural resources within the country. They must learn how to develop the potential of their human resources, because the people will be the one to stir their national development. If they bank on the human capital and innovation, it could greatly increase the level of competitiveness given that they could develop more talented individuals to maneuver the country’s growth. Therefore, if given the consideration for the work force to grow, improvement of education, enhancement of technology and innovation – altogether these can provide a proper link for productivity (Luchino, n. p). With these tools, the Brazilian economy can reach another step for growth to increase investment and keep GDP at a stable rate. Works Cited â€Å"Brazil: November 2000. † 1 November 2002. World Trade Organization. 24 February 2008 Dollar, David. â€Å"Questions and Answers with David Dollar. † Globalization. 5 April 2008 Fraga, Arminio. â€Å"A Fork in the Road. † 2005 December. Finance and Development. 8 April 2008 Langevin, Mark. â€Å"Brazil’s Key Role in Globalization. † 12 October 2004. Brazzil Magazine. 24 February 2008 Luchino, Marcelo. â€Å"The Globalization of Brazil. † 27 December 2007. Safe Democray. 8 April 2008 Mario, Estanislao Gacitua and Michael Woolcock. â€Å"Assessing Social Exlusion and Mobility in Brazil. † The World Bank. 8 April 2008 Rodriguez, Alberto. â€Å"Brazil: Seizing the Opportunity to Compete? † The World Bank. 8 April 2008. Silva, Antonio Elias. Openness and Development: A General Analysis and a Close Look at China, Argentina and Brazil. Institute of Brazilian Issues, April 2004.