Thursday, July 31, 2008

BRAZIL MAKING PROGRESS

Alexei Barrionuevo, New York Times - Long famous for its unequal distribution of wealth, Brazil has shrunk its income gap by 6 percentage points since 2001, more than any other country in South America this decade, said Francisco Ferreira, a lead economist at the World Bank.

While the top 10 percent of Brazil's earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, according to Marcelo Cartes Neri, the director of the Center for Social Policies at the Getulio Vargas Foundation in Rio de Janeiro. . .

Brazil is also outspending most of its neighbors on social programs, and overall public spending continues to be nearly four times as high as what Mexico spends as a percentage of its gross national product, Mr. Ferreira said.

The momentum of its economic expansion is expected to last. As the United States and parts of Europe struggle with recession and the fallout from housing crises, Brazil's economy shows few of the vulnerabilities of other emerging powers.

It has greatly diversified its industrial base, has massive potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade. . .

With a stronger currency and inflation mostly in check, Brazilians are on a spending spree that has become a prime motor for the economy, which grew 5.4 percent last year.

They are buying both Brazilian goods and a rising flood of imported products. Many businesses have relaxed credit terms to allow Brazilians to pay for refrigerators, cars and even plastic surgery over years instead of months, despite some of the highest interest rates in the world. In June the country reached 100 million credit cards issued, a 17 percent jump over last year. . .

Because Brazil's economy has become so diversified in recent years, the country is less susceptible to a hangover from the struggling United States economy. Brazil's exports to the United States represent just 2.5 percent of Brazil's gross national product, compared with 25 percent of G.N.P. for Mexican exports, according to Moody's. . .

Other programs, like Bolsa Familia, give small subsidies to millions of poor Brazilians to buy food and other essentials. Bolsa Familia, which benefits 45 million people nationwide in distributing an annual budget of about $5.6 billion, has been far more effective at raising per-capita incomes than recent increases in the minimum wage, which has risen 36 percent since 2003.

The bottom-up nature of such social programs has helped expand formal and informal employment as well as the Brazilian middle class. The number of people under the poverty line - defined as those earning less than $80 a month - fell by 32 percent from 2004 to 2006, Mr. Neri said.

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