10 Reasons Why Brazil Will Become A World Super Power
I have now lived in Brazil for close to 7 years. I have married a Brazilian woman, and I have two children, one which was born in Rio de Janeiro. So I am very embedded in Brazil, but I believe that I can state in an unbiased manner why I believe that Brazil is set to become an economic super power. When I look at the facts, it is a stark and scary difference to compare the fundamentals of the American economy with that of Brazil.
1. No wars or enemies
Only 25 years ago, Brazil was a military dictatorship. But since that time, Brazil has avoided military conflict. This of course is in stark contrast to the United States, where we manufacture reasons to go to war (weapons of mass destruction).
2. Made in Brazil
By and large, Brazil’s trade policy has been protectionist. Still today, many conveniences of American modern life are either non existent or very expensive. One area where they could improve greatly is in technology such as computers. Computers are still very expensive in Brazil and hence internet adoption and basic computing skills lag behind other developed nations. That said, the upshot of this policy is that Brazil produces almost everything it consumes. A great example are cars. Cars are affordable in Brazil, and I would say that 90% of the automobiles in Brazil are made in Brazil.
Contrast this with the United States. If you want to buy a vase or a cutting board, they are all made in China. All of the basic commodities of life in Brazil are manufactured and consumed internally.
3. High interest rates
As I have stated, I am truly afraid of the American economic system that now has interest rates pegged at zero. I believe that the countries that have the highest interest rates will fare the best during the economic melt down. High interest rates also encourage savings rather spending. Furthermore, high interest rates can be lowered to provide an economic stimulus for the economy.
I have been very fortunate and have been moving down large percentages of my savings into the equivalent of Brazilian T-bills. When I first purchased my apartment in 2003, interest rates were sitting at 20%. Since that time, it has dropped to 13% in 2008 and 9% in 2009. That said, I am much happier making 9% on my money here in Brazil than 0% in the United States.
4. Natural resources galore
I am astounded with the naturals resources in Brazil. Brazil is a huge land mass that is actually larger than the 48 continguous states of America. On this land is incredible wealth. Brazil is the largest exporter in the world of wood and one of the largest exporters of copper. But it does not end there. The number of fruits and vegetables in Brazil are astounding. Just going to the super market for an American is confusing because they have everything that American’s are accustomed plus so much more. I have just finished doing a bunch of Googling, but could not find anything. I would bet however if there was an index to measure the natural abundance of a country, Brazil would be the winner.
5. No natural disasters
In the United States, we all pay more for insurance because of natural disasters. In Myrtle Beach, it is for hurricanes, in the mid-west for tornadoes, and on the west coast, for earthquakes. Brazil has no natural disasters. There is some small amount of flooding in some areas but that is it.
6. Lots of water
In addition to all of the natural resources, Brazil has an abundance of water. It rains in Brazil a lot. In some parts of the United States such as California and Nevada, water will always be an infrastructure concern. In Brazil, none.
7. Oil aplenty
Off the coast of Rio de Janeiro, one of the largest oil finds was discovered. It will take years to drill, remove and distribute this oil, but Rio de Janeiro is beginning to feel like a boom town. All the major oil companies in the world are establishing operations here in Brazil. The Brazilian PetroBras is positioned to catapult into a top tier energy provider during the next decade.
8. Leading producer of alcohol
Brazil is also the world’s largest exporter of ethanol. As long as I have lived here, Brazil has always been energy independent. More importantly, all of Brazil’s cars are manufactured to burn both ethanol and gasoline. Furthermore, the country’s infrastructure is already set up so that all “gas” stations handle both alcohol and gasoline. Note: ethanol is always about 30% cheaper than gasoline.
9. Government runs a surplus
The United States is so upside down, it is painful to watch. The trade deficit plus the federal deficit will be enough to sink the United States. On the other hand, Brazil is running a surplus on federal spending and also on trade.
I am not very traveled throughout Brazil, but I recently visited Goiânia and Anápolis, both north of Rio de Janeiro. Goiânia has a metropolitan population of around 2.2M which makes it roughly the size of Pittsburgh. I visited the city and it is full of life, shopping malls, and it is a world class city. I also visited my wife’s home town of Anápolis, which has a population of 320,000. Much smaller in size, but again a city that is well developed. Brazil has a lot of the infrastructure to grow substantially in the decade to come.
Brazil is not without its problems. Government corruption is documented in the paper almost daily. The gap between the rich and the poor is the largest of any developed country. This results in higher violence levels in Rio de Janeiro and São Paulo. However, I believe that Brazil will grow and prosper despite these inherent problems.