You are on page 1of 2

Simranjeet Gill

Economics globalisation essay

Discuss the influences of globalisation on a country other than Australia and evaluate the strategies
used to promote economic growth and development.
Globalisation refers to the process of increased social, political and economic integration between
countries creating a global economy. Hence this integration into the global economy has profound
economic effects allowing greater access to trade, financial flows, technology and labour as well as
impacting upon social aspects of the economy. Thus through effective economic strategies such as micro
and macro economic policies, the emerging economy of Brazil can and has promoted an increase in
economic activity and growth. Furthermore funds derived through increased economic growth allows for
rising living standards also known as economic development.
Up until 1975, Brazil governed under a protectionist military regime, with a focus on developing a domestic
industry base in an effort to become self-sufficient hence resisting trade with the global economy.
However due to high domestic production costs and consumer prices, this required extensive foreign
borrowing, resulting in a CAD of over 8% of GDP and a unsustainable debt-servicing ratio of 102% in in the
early 80s. Thus as effect to realizing the deficiencies of this system, after becoming a democracy in 1988,
Brazil shifted its focus, beginning in the early 1990s to becoming more globally integrated under the Collar
government. Which through microeconomic reform via constitutional amendments in 1995, abolished
state monopolies through privatisation as well deregulating most industry protection. This lead to
increased efficiency through market based incentives as well as attracting investment inflows alternative
to borrowing. Since reducing protection of foreign financial flows, FDI inflows increased from $1.1 billion in
1990 to $76.1billion in 2012, accordingly allowing Brazil to decrease its debt-servicing ratio to a sustainable
15% in 2012. This reform also saw an increase in the participation of foreign enterprises in the Brazilian
economy with transnational corporations such as IBM, Oracle and Nestle playing an important influence in
increasing the productive capacity hence employment during the 1990s. Another influence of globalisation
is the formation of economic forums and free trade agreements in an attempt to expand international flow
of trade. Since the 1990s, Brazil has become a member of the CAIRNS group, WTO as well as the Mercosur
agreement and Free Trade Area of the Americas agreement. Being signatory of Doha round negotiations,
accordingly lowering overall tariff levels from 39.1% in 1989 to 7.7% in 2012 and all quantitative restrictions
were abolished. Consequently improving terms of trade from 80 to 120 over the same period of time
having a growing contribution of 2.45% of world trade.
Thus since its structural microeconomic reform in moving towards a more integrated economy, Brazil has
experienced significant economic growth becoming the largest economy in Latin America, the 3rd largest
BRIC emerging economy, and 6th largest in the world. Producing a GDP of $2.2 trillion with sustained
economic growth averaging 4.3% over the last decade. Furthermore increase economic integration also
means increase vulnerability to external shock in the global economy. Hence in order to sustain economic
growth Brazil has utilizing macroeconomic policies, both fiscal and monetary to withstand fluctuation in
the international business cycle. Beginning in 2000, the Fiscal Responsibility Law set a fiscal surplus target
of 4.25% of GDP, in an attempt to further reduce public debt and increase financial security. Since its
introduction it has been considerably successful maintaining average surplus of 2.7% increasing
attractiveness for foreign investors as well diminishing the issue of a debt trap scenario as it faced
previously. However negative effects can be seen through the exchange rate crisis in the early 1990s where
Brazil was forced to devalue its currency leading to hyper inflation rates of up to 2000% in the same
period. Likewise the Brazilian Central Bank has developed a stringent inflation-targeting framework,
applying interest rates as high as 10% to maintain its inflation target range of 2% variable of 4.5%,
generally sustaining its range for the last decade. Furthermore both fiscal and monetary response have
proved resilient during the GFC, despite severe external shock, through effective expansionary fiscal
spending and preemptive interest rates, Brazils economy only contracted 0.2%.
Furthermore, positive economic activity resulted from globalisation leads to a rise in availability of funds
for government, businesses and individuals allowing an increase standard of living otherwise known as
economic development. Hence projects include the government fiscal program, PAC (growth acceleration
1

Simranjeet Gill

Economics globalisation essay

program), launched in 2007, with an aim to expand the productive infrastructure in areas such as
technology, logistics and construction. This saw unemployment rates decrease from 9% in 2007 to under
5% in 2012 as the improvement in productive infrastructure created increased employment. Likewise
increasing the GNI per/capita based on purchasing power parity to $11,530 in 2012 almost doubling since
the introduction of the program. Furthermore Brazil has also been able to expand its health care system
through drastically increasing expenditure to over $2 billion in 2012 compared to only $74 million in 1995.
Sparking numerous positive effects as basic immunization coverage is around 98% while water coverage
has increased from 94% in 2000 to 98% in 2012. Subsequently increasing life expectancy from 67 in 1990
to 74 in 2012. Lastly improving future production quality and increasing general educational attainment is
also an important goal of the economic development for Brazil. Hence the government introduced the
microeconomic policy, Fund for the Development of Basic Education and Appreciation of the Teaching
Profession in 2006 to finance a growth in primary and secondary education along poorer communities.
Increasing overall youth literacy rates from 97% in 2007 to almost 99% in 2012. The ultimate impact of
globalisation on economic develop is evident through Brazils HDI of 0.730 in 2012, placing it 77th in the
world, which although can be seen as considerable low has increased from 0.590 in 1990.
Nonetheless, due to the increased consumers choices and material desires of the global consumer,
globalisation constructs greed creating negative social alterations such as corruption, income inequality
and environmental degradation. Evident through the Corruptions Perceptions Index theoretically
identified Brazil as having a relatively high index of 43 in 2013. Furthermore inequality is one of Brazils
most prominent social issues having a GINI co-efficient of 54.7 in 2012. However measures have been
made to decrease inequality while also countering absolute poverty. The Silvia government in 2004,
introduced Zero Hunger program giving the poorest quintile of Brazilian families up to 95 real per month,
costing only 0.4% of GDP. Hence remarkably decreasing the poverty line from over 30% in 2005 to 15.9%
in 2012 while also decreasing its GINI co-efficient from 10% since its insertion. Furthermore although
pioneering sustainable biofuel and ethanol, economic growth has come at an expense of the natural
environment of Brazil. As deforestation of the Amazon is considered an environmental catastrophe, being
critical to the global ecosystem. Furthermore in 2005 Brazil was the 3rd largest carbon emissions polluter
in the world however through ratifying policies discussed in the Copenhagen Climate Conference in 2009,
Brazil has while not decreasing emissions it can relatively slowing the rate of growth and well as
implementing proactive remedy projects.
Globalisation has had a very interesting effect on Brazils economy allowing have both increased economic
growth and activity and economic development. Nevertheless globalisation has lead to various external
shocks and environmental issues. However overall Brazil has used effective economic strategies to mainly
benefit from globalisation with having sustained economic growth, increased employment and reduced
foreign debt. Thus the future looks bright for Brazil having positive forecasted economic growth in the
future as well host the current FIFA world cup and been chosen to host the Olympics in 2016, highlighting
ultimate global image as an strong emerging economy.

You might also like