In Brazil, per capita income rose 6.5% last year, reaching 19,016 reais (US$ 11,490) compared to 16,634 reais (US$ 10,051) in 2009. In 2010, GDP grew 7.5%, reaching 3.675 trillion reais (US$ 2,221). And the population of Brazil rose to 190.8 million.
In the last decade (2000-2010), per capita income rose an annual average of 2.4%. In the previous decade (1990-1999) it rose an average 1.1% per year.
According to the Brazilian government statistical bureau (IBGE), in 2010 the investment rate, as a percentage of GDP, rose to 18.4%, the best result since 2008 when it reached 19.1% of GDP.
Passbook savings as a percentage of GDP reached 16.5% in 2010, up from 14.7% in 2009, but down from 18.8% in 2008. Finally, the IBGE reports that the country’s financial needs (credit) reached 97.686 billion reais (US$ 59.02 billion), up from 56.916 billion reais (US$ 34,39 billion) in 2009.
Brazil’s Finance minister, Guido Mantega, citing the latest numbers from the IBGE showing that the economy grew 0.7% in the last quarter of 2010, says that that is proof things are under control.
“During the same period, government outlays dropped 0.3%. That shows there is no overheating and that we can expect domestic savings to rise above what they were in 2010,” said the minister.
Referring to 2010 GDP expansion of 7.5%, Mantega said it was the result of “an exceptional moment,” due to the international crisis. The exceptional moment consisted of a stimulus by the Luiz Inácio Lula da Silva administration – mainly reduced sales taxes and looser credit – that spurred the population onto a shopping spree with resultant China-like growth of 9% in the first quarter of 2010.
Mantega insisted that things were under control now. “At this time, we are growing an acceptable 5% to 5.5%,” he said.
And then he added that the upside to 2010 GDP growth was that Brazil had become the world’s seventh biggest economy – ahead of France and the United Kingdom – based on price parity and purchasing power.
The minister explained that those numbers would soon be released by the International Monetary Fund or the World Bank, but that he was confident they would show Brazil in 7th place.
Tax Cuts
Although the bar was lowered significantly due to the international financial crisis of 2008-2009, GDP growth of 7.5% in 2010, as announced last week by the government was “exceptional,” said Gabriel Pinto, an economist at the Rio de Janeiro Industrial Federation (Firjan).
In fact, it was the biggest jump in GDP since 1986 (when GDP also rose 7.5%).
Pinto enthusiastically pointed out that the 2010 GDP surge was not just the result of a consumption spike (although one existed), but a broad-based increase boosted by strong results in the industrial sector.
He was especially pleased with the 22% rise in gross fixed capital formation, pointing out that it laid the foundation for sustainable long-term growth. Pinto added that 7.5% GDP growth had positive effects on social well-being in general (“feel good factor”), not to mention a historically low unemployment rate in Brazil last year and the expansion of salary mass that made the sharp rise in domestic consumption possible.
According to Pinto, the downside of 2010 GDP growth was that it included a 12.5% increase in taxes on production. Pinto pointed out that the tax increase was almost double the final GDP growth figure.
He said that the bigger tax burden was evidence of the urgent need for tax reform. “Our tax load is at a very high level. And as it grows more than GDP, it retards economic growth. It is a complicated equation that has a long-term negative effect on overall growth.”
Pinto concluded by saying that the Rio de Janeiro industrial sector is set to continue performing well. He announced investment plans that stretch into the year 2016. “We certainly intend to continue to be a vigorous segment of the country’s economy.”
