Brazil has a diversified industrial developing economy that is characterised by heavy industry such as steel manufacture, motor car production and mineral extraction. Agricultural production and export is also a major sector. Brazil has the world's largest commercial head of cattle and is the world's leading producer of coffee, oranges and soya. Brazil's most famous companies are Vale do Rio Doce, the world's largest producer of iron ore and Embraer, the world's 4th largest aircraft manufacturer. In 2004 the state oil company, Petrobras only had to import one tenth of Brazil's oil consumption so domestic prices only increased by 11 % in 2004, against a crude oil price rise of 62 %. In 2006 Brazil became self sufficient in oil. Brazil generates 80 % of it's electricity hydroelectrically.

In comparison to an advanced economy wages are substantially lower and poverty is more entrenched given that 50% of Brazilians live on less than US $2 per day. However purchasing power is greater and prices of domestic produce are significantly less. The minimum wage in Brazil is R$300 (~ USD 140) per month. The average household income is R$986 (~ USD 461). Credit facilities available to ordinary people are much more limited than you will be used to and a central bank interest rate of 12.25% puts large loans out of reach.

It is generally perceived that there is a vast wealth gap between the rich and poor in Brazil. This reputation was made in the 1970's when Brazil reached the end of it's industrialisation phase. Some 35 years later, whilst the poor had little to begin with, the moneyed classes have been hammered by 2 oil price shocks; sovereign debt default; hyper inflation and the collapse of a new currency. The internet boom largely passed over Brazil and in the 10 year period 1994 to 2004 Brazil fell from the 5th largest to the 15th largest economy in the world, but recovered to 9th largest by 2006.  In contrast there has been more concerted effort on social development and new education initiatives in the last 10 years than Brazil has ever experienced in it's history. 

From a Brazilian's perspective life in the economy is unfairly tough. From a tourist perspective with your Dollars, Euros or Yen buying you more than at home it's pretty good, but the golden era of Brazilian value during 2003-2004 has now passed.

Currency.

Brazil's currency is named Real (pronounced hey-al) or in the plural Reais (pronounced hey-ice). It is divided into 100 centavos. The notes come in denominations of 1, 2, 5, 10, 20, 50 and R$100 and (confusingly) there are two mints of coins in circulation:1994 and 1999. Additionally there is a plastic R$10 note commemorating the 500th anniversary of Brazil in the year 2000. The R$100 note is quite rare and unless you ask for it at a bank counter you are unlikely to encounter one. The shops denote R$ in front of the figure, financial markets use BRL.  The Real was launched in mid 1994 at parity with the US dollar in an effort to kill inflation. The currency was a roaring success and within the first few days broke parity with the US dollar to reach an all time high of 79 buying USD 1 ! Sadly the party was short lived and after several years of a crawling exchange rate peg, the Real was freely floated in 1999. At it's lowest in October 2002 USD1 bought BRL 3.95 though thankfully since 2003 the currency has rallied to its present day value of around 1.20 to the dollar. As a tourist rule of thumb, you can buy as much in Brazil for R$1 as you can in the USA or UK for $1 or 1. The below chart shows the daily closing price of the Real from 1st January 1995 until 19th May 2006. Click here to see how much R$ 100 is worth today

Financial Markets.

Brazil's markets are notorious for volatility and the wild swings have made and lost many fortunes. The Real can move by as much as 5% in a single day and the Ibovespa, Brazil's leading stock index, by similar amounts. Brazil's benchmark 2040 bond is the most widely traded emerging market asset. Brazil has the largest stock market in Latin America with a value of around USD 655 Billion (April 2006), though this is considerably smaller than the trillion dollar markets that you will find in advanced economies. One of the main economic issues that faced Brazil was that it was the most indebted emerging market with over USD 400 Billion of outstanding loans. The Brazilian economic position has improved markedly in  the last few years and now after paying down substantial amounts of debt, Brazil now has more in reserved than debts owed.