Economy-overview: Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. Prior to the institution of a stabilization plan-the Plano Real (Real Plan) in mid-1994, stratospheric inflation rates had disrupted economic activity and discouraged foreign investment. Since then, tight monetary policy has brought inflation under control-consumer prices increased by less than 5% in 1997 compared to more than 1,000% in 1994. At the same time, GDP growth slowed from 5.7% in 1994 to about 3.0% in 1997 due to tighter credit. The strong currency, another cornerstone of the Real Plan, has encouraged imports-contributing to a growing trade deficit-and restrained export growth. Brazil's more stable economy allowed it to weather the fallout in 1995 from the Mexican peso crisis relatively well. Record levels of foreign investment have flowed in, helping support the Real Plan through financial shocks in October-November 1997 that occurred in the wake of the Asian financial crisis. These shocks caused Brazil's foreign exchange reserves to drop by $8 billion to $52 billion and the stock market to decline by about 25%, although it still ended up more than 30% for the year. President CARDOSO remains committed to defending the Real Plan, but he faces several key challenges domestically and abroad. His package of fiscal reforms requiring constitutional amendments has progressed slowly through the balkanized Brazilian legislature; in their absence, the government continues to run deficits and has limited room to relax its interest and exchange rate policies if it wants to keep inflation under control. Some foreign investors remain concerned about the viability of Brazil's exchange rate policy because of the country's fiscal and current account deficits. The government thus has to contend with the possibility of capital flight or a speculative attack that could draw down foreign reserves to a critical level and force a devaluation.
GDP: purchasing power parity-$1.04 trillion (1997 est.)
GDP-real growth rate: 3% (1997)
GDP-per capita: purchasing power parity-$6,300 (1997 est.)
GDP-composition by sector: agriculture: 13% industry: 38% services: 49% (1995)
Inflation rate-consumer price index: 4.8% (1997)
Labor force: total: 57 million (1989 est.) by occupation: services 42%, agriculture 31%, industry 27%
Unemployment rate: 7% (1997 est.)
Budget: revenues: $87.5 billion expenditures: $96 billion, including capital expenditures of $NA (1996)
Industries: textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment