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pteklenburg@worldbank.org

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1818 H Street NW, Washington, DC 20433
pteklenburg@worldbank.org

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Brazil Overview

With a Gross Domestic Product (GDP) of US$ 2.253 trillion in 2012, Brazil is the world's seventh wealthiest economy. It is also the largest country in area and population in Latin America and the Caribbean.

The country will host the World Cup in 2014 and the Olympic Games in 2016, demanding massive investments in areas such as urban and social development and transport infrastructure.

The Brazilian economy slowed significantly over 2011 and 2012. The GDP growth of 7.5%, decelerated to 2.7% in 2011 and came to 0.9% in 2012. Industrial output and investment demand were affected disproportionately.

The slowdown was driven by both domestic and external factors. While the stimulus measures undertaken have so far failed to lift economic activity, signs suggest that the business cycle may finally start to gather forward momentum.

Still, Brazil’s strong domestic market is less vulnerable to external crisis, and Brazilians are benefiting from stable economic growth, relatively low inflation rates and improvements in social well-being.

The financial sector has weathered the slowdown well so far. The banking system has remained sound and resilient. Despite rapid credit growth, lower interest rates have helped contain delinquencies and allowed asset quality to broadly stabilize.

Foreign direct investment remains more than sufficient to cover the current account deficit, which has hovered around 2.2% of GDP. Portfolio flows showed significant volatility however due to changing interest rate differentials and imposition of financial transaction taxes.

Brazil’s overall macroeconomic framework is solid and sustainable in the medium term. The main risks to the outlook relate to the external environment however mitigated by high foreign reserve levels (about US$380 billion), favorable external debt composition, a current account fully covered by foreign direct investment and an overall low degree of trade openness.

The Growth Acceleration Plan (in Portuguese) was launched in 2007 to increase investment in infrastructure and provide tax incentives for faster and more robust economic growth.

In 2012, the Government launched a range of initiatives to reduce energy costs, restructure oil royalty payments, strengthen investment in infrastructure through foreign participation, and reform the subnational value-added tax.

Brazil experiences extreme regional differences, especially in social indicators such as health, infant mortality and nutrition. The richer South and Southeast regions enjoy much better indicators than the poorer North and Northeast.

Poverty (people living with US$2 per day) has fallen markedly, from 21% of the population in 2003 to 11% in 2009. Extreme poverty (people living with US$1.25 per day) also dropped dramatically, from 10% in 2004 to 2.2% in 2009.

Between 2001 and 2009, the income growth rate of the poorest 10% of the population was 7% per year, while that of the richest 10% was 1.7%. This helped decrease income inequality (measured by the Gini index) to reach a 50-year low of 0.519 in 2011.

Despite these achievements, inequality remains at relatively high levels for a middle income country. After having reached universal coverage in primary education, Brazil is now struggling to improve the quality and outcome of the system, especially at the basic and secondary levels.

There has been enormous progress in decreasing the deforestation of the rain forest and other sensitive biomes, but the country faces important development challenges in combining the benefits of agricultural growth, environmental protection and the sustainable development.

As one of the leading nations on climate negotiations, Brazil has committed voluntarily to reducing its greenhouse gas emissions by between 36.1% and 38.9% until 2020.

The Bank’s mission is to help Brazil secure long-term sustainable growth, providing development opportunities for its population. The Bank's 2012-2015 Partnership Strategy has guaranteed  US$ 5.8 billion in investments for the first two years with a strong focus on the subnational entities (states and large municipalities) and redoubled support for Brazil's Northeast, the country's poorest region.

The key pillars of the strategy are to:

  • strengthen public and private investment,
  • improve service delivery to the poor;
  • strengthen regional and territorial development; and
  • support the effective management of natural resources and the environment.

In September 2013, there were 82 active projects financed by the International Bank for Reconstruction and Development (IBRD) in Brazil, for a total of US$9.1 billion in commitments. Another 23 global environmental projects, carbon finance, guarantees and recipient-executed projects were also active, totaling US$320 million in grants and guarantees.

The World Bank Group’s support focuses on reaching the poorest and achieving higher levels of quality and efficiency in social services. The main goals are to eradicate poverty and share prosperity in the country through the support of Government actions by the World Bank and its branch for the private sector, the International Finance Corporation.

Some of the Bank-financed projects in execution include support for the highly effective Bolsa Família conditional cash transfer program that reaches 12.7 million families (or nearly 50 million people).

The program is among the most effective social protection programs in the world, having helped raise approximately 20 million people out of poverty between 2003 and 2009 and well as significantly reducing income inequality. Bolsa Família is part of the Plan ‘Brazil without Misery” that intends to eradicate extreme poverty in the country by the end of 2014.

Some of the active projects include the Family Health Program, several sustainable rural development projects in the Northeast and many education, water and urban interventions. The Bank has also helped implement the internationally renowned AIDS projects and the Amazon Region Protected Areas Initiative, which helped contain deforestation in the Amazon.

In addition to directly supporting program in the country, the Bank also produces numerous important research reports, such as the Growing Old in an Older Brazil report and the Brazil Low Carbon Study, and uses its global network to ensure that other countries benefit from Brazil's knowledge in areas where the country is an acknowledged global leader, such as clean energy, fiscal management, tropical agricultural research, conditional cash transfers, AIDS prevention and community-driven development.

The Bank has been very active helping states and municipalities put in place results-oriented management practices, based on sound fiscal management. Some examples include:

In few countries the ecosystem is as crucial to development and people's welfare as in Brazil. The country has one-third of the world’s tropical rain forests, the largest reservoir of fresh water (20%), and a savanna with the greatest biodiversity in the world, the Cerrado. A significant part of Brazil’s economy relies on the use of natural resources.

However, these resources depend on sustainable use for maximum social and economic benefits, and Brazil is increasingly suffering from extreme climate events, including floods and droughts, that especially jeopardize the livelihoods of the poor and make the country more vulnerable to natural disasters.

The World Bank's support for a sustainable Brazil is directed at improving quality of life through better local services in urban and rural areas, and for efficient management of Brazil’s abundant but fragile natural assets.

Indicators show progress on protection and sustained development of the large biomes. Legal allocation of water rights has increased in many important hydrographical basins, facilitating greater sustainability in water use and resource management, however, sanitation and pollution control are still major challenges.

In recent years, Brazil has improved its housing and rural electricity programs, as well as its environmental legislation, and has undertaken several climate change initiatives, including a voluntary program to reduce emissions between 36.1% to 38.9% over projected 2020 levels.

The Bank responded to the call for more support to government's initiatives which coordinate environmental protection and sustainable development for populations in the Amazon, and developed a framework for engagement in development initiatives in this sensitive biome. The framework was extensively consulted with government, academia, private sector and national and international civil society.

Brazil’s project portfolio spans several areas of the economy, civil society, and the environment and had significant positive impacts in the lives of people, including, especially, those amongst the most vulnerable.

The Bolsa Família Program has technical and financial support from the World Bank and is considered one of the main reasons behind the significant social results achieved by Brazil in the last years.

The program reaches over 12.7 million families — more than 50 million people — a large part of the country’s low income population and served an important role in shielding the poorest from the 2009 global economic slowdown.

In keeping with its commitment to help improve the quality of life of the rural poor, the World Bank supports the Ceará Integrated Water Resource Management Project, which helped complete a canal of over 200 kilometers in Fortaleza, thus ensuring water provision for over 2 million people for 30 years in one of Brazil’s most arid regions.

In the future, the canal will be extended to a nearby port and industrial district, helping create jobs and boosting the state’s growth.

Health and Education

On the health front, several initiatives have made a difference in providing health care access to the neediest, including the Second Family Health Extension Program, which provides medical attention to vulnerable groups that do not have easy access to the hospital system. Vaccination coverage and child nutrition have also improved under the program.

Additionally, with World Bank help, Brazil developed one of the most encompassing and efficient strategies in the world to slow the rate of infection and to care for those affected by HIV/AIDS. The program has stabilized the advance of the epidemics through: the free distribution of drugs, focused educational and awareness campaigns.

The Bank has also been involved in providing assistance for small scale agriculture and production in innovative ways, which empower local communities in the poor Northeast and other regions to do their own investments and manage their own production. A second generation of these projects is linking the small producers to markets, further increasing income and wellbeing.

The World Bank supports a new generation of projects which focus on local and regional aptitudes for environmentally sustainable income generation. These include:

LENDING

Brazil: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

Around The Bank Group

Find out what the Bank Group's branches are doing in Brazil