Brazil Embracing Globalization

BRAZIL EMBRACING GLOBALIZATION

BrazilEmbracing Globalization

Purpose

Thecase study illustrates effects of globalization in developingcountries by explaining various political, economic and socialdevelopments that occurred in Brazil. Over a long time, the economyof Brazil was characterized by high inflation, economic instability,poverty and high inequality levels among the population. Therefore,the process of stabilizing the economy entailed the establishment ofnew reforms and expansion of domestic markets to facilitate tradeamong neighboring states to enhance peaceful coexistence and promoteeconomic welfare. The case study also brings out the effect of tradeliberalization on foreign direct investment and the impact on thesocial life of the citizens since social policies were not craftedduring these processes.

Introductionand Overview

Globalizationdescribes the way people and companies interact and integrateaffecting their immediate environment, culture and political systemswithin the economy. The process has a significant effect on economicdevelopment hence catalyzed international trade and investmentsleading to a new phase in the Brazilian economy. It changed Brazilnot only economically but also politically and socially making it thelargest economy in the South America region. The Brazilian economyfaced hurdles over the past five decades which have beencharacterized by a paradigm shift from the state-oriented economyinto a market-driven economic model. The period between 1990 and 2000entailed the establishment of various market-oriented reforms inprivatization and trade liberalization. Brazil encountered numerousfinancial hurdles at the beginning of the year 1990 which emanatedfrom instability in the economy and high inflation leading to theestablishment of the real plan in 1994. The program was meant tocurb economic instability since it was based on the concept of fiscaladjustment. Therefore, Brazil was able to access foreign domesticinvestment which had been restricted to only certain sectors whichwere highly regulated leading to immense growth in its economy.Conservative modernization and import substitution policies emergedduring nineteen thirties and relied on generation and maintenance ofa given proportion of revenues acquired from the export ofagricultural commodities. These revenues were paramount in aiding thegovernment in creating subsidies for particular sectors and transferbenefits, but when they were unavailable, compensation was donethrough inflation or borrowing. Conservative modernization impliedthat only the more organized groups of the urban society benefitedfrom economic growth and industrialization that were rife in thenineteen thirties. On the other hand, import substitution referred tothe process by which the government established trade barriers,fiscal incentives, and subsidies to support local industries withoutcompeting for efficiency. However, import substitution did not workin Brazil as it led to increased borrowing from international moneylenders who later lost confidence in the ability of Brazil to repaythe loan. Therefore, Brazil had to seek monetary support from theinternational financial funding as a means of emergency funding.Additionally, it also led to inflation which made workers push forincreased pay to contain the high cost of living. Subsequently,exports from Brazil became too expensive limiting theirattractiveness to investors who resulted to avoiding investing theirmoney in Brazil (David, 2002).

Mercosurtrading organization was established in 1991 with the primary goal ofcreating free movements of services, goods, people and capital amongmember states which included Brazil, Argentina, Paraguay, andUruguay. The organization helped in eradicating hurdles hinderingregional trade which included income inequalities, high tariffs anddifferent technical requirements for delivering goods to the market.Brazil and Argentina had big economies during the regionalintegration due to the regulation of exports and imports among membercountries. As a matter of fact, Brazil employed Mercosur as a tool toconfront other powerful nations in the free trade area for Americasespecially the United States and the European Union. Therefore, theBrazilian market expanded since Uruguay, Paraguay and Argentinadepended on products that originated from Brazil enlarging its marketshare. Additionally, exporters and international investors increasedtheir regional coverage in Brazil as a result of increased tradewithin the Mecursor trade bloc. The position of Brazil in theMercusor was influenced by its vision of building a regional powerand predominance in trade whereby they developed domestic policieswhich acted as drivers of change. Therefore, Brazil overcame most ofits challenges due the involvement in the Mercusor trade organizationthat expanded its market share thus growing its economy and led topeaceful coexistence with other neighboring member states. Finally,the economy of Brazil opened up reflecting on positive impacts ofregional integration since exports had ready markets all over theworld due to globalization.

Regionalintegration is paramount in the developing countries as it enhancespeaceful coexistence of neighboring countries and promotes economicprosperity within the trade bloc. Member countries engage in tradeexchanging commodities of value for money and also exchanging ideaswhile coming up with various policies meant to safeguard theirinterests. On the other hand, globalization has been on the risesince the pre-colonial period and has immensely boosted tradeworldwide through the elimination of various trade barriers andavailability of foreign investments. The process has enableddeveloping countries to access international loans as it hasfacilitated the flow of capital throughout the world. Additionally,globalization has enabled multinational companies to make a directforeign investment, improved the legal system for conducting businessand lowered the taxes that are imposed on imports of the developingcountries. The case study of Brazil elucidates that a workingpolitical system influences the impacts of globalization whereby thesystem determines the stability of the currency and inflation whichare paramount in influencing the attractiveness of the foreignmarkets. Brazil received significant foreign direct investment andcreated international market due to globalization which led tostabilization of its economy and fast growth making the country riseto higher levels worldwide.

UpdatedInformation

Currently,globalization has emerged as an important concept globally since itcauses significant changes in the economies of different nations. Theprocess has led to enormous economic growth in Brazil enabling thecountry to move from a developing class economy to middle-classlevel. Previously, various economic reforms were introduced inBrazil, which included trade liberalization and globalization toattract foreign investment leading to stability in the nation.Additionally, increased flow of FDI and accessibility to trade hasboosted the economic situation in the country significantly. Notably,Brazil has been ranked among the economies experiencing the fastestgrowth in the world such as China, India, and Russia. These countriesare perceived as having the intense ability in determining the courseof the global economy hence serving as a perfect illustration ofmodern globalization. Particularly, the location of Brazil in SouthAmerica helps the entire region benefit from the high status realizedby Brazil in the global economy. The country plays a leading role inMercosur and integrates South America with other parts of the world.Finally, Brazil is on the verge of heightening its influence withinthe international arena especially with global bodies which includethe World Bank, the International Monetary Fund, and world tradeorganization.

References

DavidR. (2002). Brazilianstudies at Harvard University.Cambridge, MA: David Rockefeller Center for Latin American Studies.