Brazil Economy

Brazil Economy and Finance

Despite the great potential wealth of the country, the return on production is low, as a result of insufficient general and technical knowledge, the great spread of chronic diseases, inadequate nutrition, and also due to corporate and national organization defects, among which the deficiency of the means of communication and transport, the persistence of primitive and ineffective methods in agriculture, the old-fashioned equipment in industries deserve prominence. The climate, tropical or semi-tropical in a large part of the territory, contributes to reducing the performance of work.

In recent years, the impetus given by the special conditions of the war period to the development of new activities and the expansion of a part of those already existing has led to a notable progress of the processing industries, of some branches of the extractive industry and of some sectors. agriculture, progress facilitated initially by the breadth of credit, the premise of monetary inflation.

According to Justinshoes, the organization of private economic activities suffers from the lack of capital; even companies of the limited company type are often controlled by small groups or families. From this derive: a poor development of the securities market, a prevalence of foreign capital in investments in public utility services and a high average interest rate (the legal maximum rate is 12% per year). Existing capital tends to flow into more profitable uses with great ease, and therefore there is a very accentuated speculative aspect of investments and little continuity. In recent years there has been a concentration of financing in the construction sector which has led to an intensification in the pace of construction in the main urban centers.

Since 1939 the government has established minimum wage levels for each region and city (which does not extend to rural workers); these minimums were then raised, during the Second World War, to adjust them to the increase in the cost of living. Currently the level of industrial wages is about four times higher than before the war.

S; The figures of the balance sheets, from 1938 to 1948, in millions of cruzeiros are shown below:

At December 31, 1947, the internal public debt amounted to 11 billion and the external debt, consisting of dollar bonds, to 7.4 billion.

During the war, Brazil took advantage of its favorable position as an exporter of food products and industrial raw materials to build up ample stocks of foreign exchange, which it was able to use in part, at the end of the conflict, to reduce the foreign public debt, redeem the capital of some British-owned companies and to import machinery and equipment, especially from the United States, for the industrialization of the country and the improvement of the transport system. In the course of 1947, however, the depletion of dollar reserves, following a gradually increasing trade deficit with the United States, and the continuing impossibility of using the large frozen balances in sterling forced the government to to accentuate (June 1947) the control of exchange rates, which had been practically abolished at the end of the war, and to apply a tax on transfers of currency for certain types of operations which since January 1, 1948 is 5%. At the end of May 1948 the gold reserves at the disposal of the treasury amounted to approximately 6.5 billion and foreign exchange at Banco do Brasil reached 7.5 billion, consisting mainly of blocked accounts in sterling.

The milreis, which in September 1939 had been pegged to the dollar on the basis of 16.50 milreis per 1 dollar, was replaced from 1 November 1942 with a new currency, of identical value but divided into 100 centavos, the cruzeiro (from the ” Croce del Sud “), which kept the aforementioned ratio against the dollar unchanged until July 22, 1946. From this date, the official quotation was suspended and two rates for the sale and purchase of the currencies were fixed by decree, to the extent, respectively, of 18.72 and 18.38 cruzeirosper dollar. In July 1948 Brazil communicated to the International Monetary Fund; in which it participates with a share of 150 million dollars, the gold parity of the cruzeiro of gr. 0.0480363 fine, corresponding to an exchange rate of 18.5 cruzeiros per dollar.

At the end of January 1948, circulation amounted to 17.2 milliards (December 1939 = 4 milliards) and deposits with banks rose to 41.9 milliards, of which 27.2 on sight or short-term.

Brazil Economy