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Brazil’s Growing Economic Prosperity


Written by Luca

While the United States and Europe are fretting over the financial crisis, Brazil quietly rejoices in its recent discovery of one of the largest petroleum reserves in the world. The new oil discovered far off into the Atlantic Ocean in the Santos Basin propels Brazil as a promising new energy producer, as the new oil discoveries place Brazil as the eighth global producer. Although the newly found oil brings promise of financial stability and secure revenue, it creates an equally great ethical dilemma Brazil has pushed for alternative energy for decades, as it relies predominantly on biofuels for national energy consumption. Brazil has invested significant amounts on ethanol, as it has always produced vast amounts of sugar, to produce the alternative fuels called biofuels. It is important to note, however, that alternative energy only implies that it is a substitute energy source, and not a clean fuel. Multiple highly regarded studies have concluded that ethanol-based fuels are less environmentally friendly than petroleum-based fuels, because the process to produce an ethanol-based fuel combined with the fact that the ethanol-based fuel is less efficient to combust than a petroleum-based fuel makes ethanol-based fuels less environmentally friendly.

Oil Brings Economic Success

actual oil revenue will not reach Brazilian coffers for years to come

Therefore, leaders in Brazil are debating whether putting a polluting commodity is worth the environmental drawbacks. In a world run by cold cash, interest for the environment becomes almost irrelevant. This is especially true at a time when the world is tumbling into a financial crisis of great proportion. Brazil’s oil supply, however, is difficult to tap, as the oil fields sit more than 6,000 meters below the surface of the earth. This inconvenience creates multiple problems, including expensive extraction costs and a longer wait for the actual extraction of oil. Therefore, actual oil revenue will not reach Brazilian coffers for years to come, which means that Brazil is holding a theoretical resource, which it cannot access.

Brazil considers itself an environmentally friendly nation, because it manages to produce a significant amount of biofuels, which take the place of oil, at least until now. But Brazil is in fact plagued by environmental concerns. Its largest cities, Rio de Janeiro and Sao Paolo, are plagued by air pollution, and with greater industrialization this problem has only increased. The continued fast-paced deforestation of the Amazon Rainforest poses grave consequences on a global scale, as the emission of carbon dioxide increases as trees in this vital area are cut down, because trees emit CO2 when they are cut down. Not only is Brazil contributing to rising carbon dioxide emissions with its lack of control over the deforestation of the Amazon, but also is causing the extinction of thousands of species that are losing their natural habitat. In all of this, Brazil is condemning China for its weak environmental regulation. China certainly needs to dramatically reduce carbon emissions, but Brazil is not the country that should denounce China’s environmental practices.

Economic Regulation Essential

Brazilian economy is expanding, as wages and employment rates are increasing

Brazil, along with Russia, India, and China, who form BRIC, has experienced sustained, albeit insignificant in comparison to the other three nations, growth in the past decade. With its growing economic power, which will only increase with the recent discovery of oil, Brazil has begun exerting a larger political influence on the rest of South America. The Brazilian economy is expanding, as wages and employment rates are increasing. Direct foreign investments have contributed positively to Brazil’s economic growth. Brazilian President Lula’s economic policies have attracted greater direct foreign investments, as Brazil’s economic regulation has improved. Brazil’s minimal exposure to the risk of the financial crisis can be attributed to the strict banking regulation, which was instituted in the 1990s reforms. The strict banking regulations set in place in the 1990s, whose absence in the United States has caused the ongoing crisis, has protected Brazil from much of today’s financial turmoil. Brazil’s exposure to the crisis is minimal compared to other developed nations, as the total amount of credit in Brazil amounts to only 38% of the GDP compared to the 200% of the GDP in the United States. In times of financial turbulence, the smaller the percentage in GDP the total amount of credit is, the less exposed the country’s economy is to risk. Therefore, Brazil will be less affected by the credit crunch occurring in the United States. In fact, estimates for Brazil’s economic growth for 2008 have only fallen from an increase of between 4.5 to 5.5 percent to an increase between 2.5 and 3.5 percent.

Brazil’s continued economic prosperity will depend on its management of essential internal infrastructure improvements. Although controversial, Brazil’s success in the world economy will depend on the exploitation of its newly discovered oil resources. Brazil will need to carefully balance energy use with environmental protection as the two unfortunately do not yet work hand in hand. Similarly to other countries, continued reforms in economic and governing policies will dictate Brazil’s possible continued economic and social improvement.


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