Comparison between Economies of Brazil and the United States - Essay Example

Comparison between Economies of Brazil and the United s Brazil and the United s belong to some of the biggest economies in the world with high Gross Domestic Products (GDPs). It implies that the two countries can fund their development projects independently without any assistance from outside since they are both donor countries. By nominal Gross Domestic Product (GDP), the United State has the largest economy globally while Brazil follows closely at position seven (Claitors Law Books and Publishing Division, 2014). The Gross Domestic Products (GDPs) of Both Brazil and the United States indicate their purchasing power parity (PPP) and poverty indices. Since both countries have big economies, the level of poverty in the two countries has tremendously reduced over the years as compared to many nations that are still developing (Heritage.org, 2014). This paper compares the economic aspects of both Brazil and United States, taking their inflation and exchange rates into account. The United States has the biggest economy globally with its economy amounting to about 22.4% of the nominal global GDP. In addition, the economy of the United States represents 16.6% of the global GDP in terms of the purchasing power parity. In 2014, the Gross Domestic Product (GDP) of the United States stood at a whopping $17.535 trillion in the third quarter of the fiscal year (Rohter, 2012). When it comes to Brazil, it is worth noting that Brazil prides itself as the seventh largest economy globally in terms of purchasing power parity and Gross Domestic Product (GDP). Brazilian economy is probably the biggest in Latin America with an annual growth rate of 5 % in Gross Domestic Product (GDP). In as much as the United States and Brazil have big economies, it is important to mention that Brazil has come a longer way than the United States. For Brazil to compete with a country like the United States, it means that the economy of Brazil has been doing exceptionally well for the past one decade (Heritage.org, 2014). One of the reasons that have put United States on the global economic map, at least for the longest time in history is the fact that the U.S. Dollar operates as a unit currency of transacting international deals. The vast majority of international transactions use the Dollar as the sole currency of transactions. Perhaps it is because the U.S. Dollar is the most stable currency in the world. While some countries prefer to use the U.S. Dollar as the de facto currency, many others have made the U.S. Dollar the official currency of transacting official government businesses. In as much as the United States has performed well as far as the sustainability of its Gross Domestic Product (GDP) is concerned, it has been notable that the unemployment rate in the United States has been piling pressure on the federal government (Lo & Hiscock, 2014). The economy of the United States thrives through capital investment and extensive economic research. In this respect, the United States collaborates with its trading partners for the benefit of all countries. Some of the major trading partners of the U.S. government include Canada, Mexico, Germany, China, South Korea, and Japan. On the other hand, Brazil joined the BRIC economies in 2009, which also include China, India, and Russia, to contest for the topmost country in upward evolution of competitiveness. The World Economic forum ranked Brazil first among the huge economies that were its rivals in the competition. Besides, the Forbes magazine ranked Brazil as the only Latin American country having the fifth largest number of billionaires across the globe. In this ranking, Brazil floored big economies such as the japan and the United Kingdom (Lo & Hiscock, 2014). Brazil and the United States share certain characteristics that have propelled them to economic prosperity over the years. Both countries have endowments in natural resources although the United States has exploited its resources to the point of depletion because of its early industrialization. Brazil, on the other hand, still has a great economic potential considering that a significant chunk of its natural resources is still intact. Among the OECD countries, America took the lead as far as the employee and household earnings were concerned. Brazil has ensured that it stays sustainable with its rapid growth rate through a sustainability program that it developed in the 1990s (Claitors Law Books and Publishing Division, 2014). Comparison between economic statistic of Brazil and the United States TABLE 1: USA (1) (2) (3) (4) (5) (6) (7) (8) (9) (11) (12) Year GDP in billion US$ GDP % growth Pop. In millions Per Capita GDP in US$ CPI Inflation Rate (P%) Exports in billion US$ Imports in billion US$ Exports % of GDP Imports % of GDP 1997 8608.5 4.5 271.180 31,573 159.10 2.3 649 916 11 12 1998 9089.1 4.4 274.552 32,949 161.60 1.6 663 912 10 12 1999 9665.7 4.8 277.966 34,639 164.30 2.2 701 930 10 13 2000 10289.7 4.1 281.422 36,467 168.80 3.4 776 1,223 11 14 2001 10625.3 0.9 284.184 37,286 175.10 2.8 736 1,123 10 13 2002 10980.2 1.8 286.974 38,175 177.10 1.6 723 1,148 9 13 2003 11512.2 2.8 289.790 39,682 181.70 2.3 687 1,165 9 13 2004 12277 3.8 292.635 41,929 185.20 2.7 714.5 1,260 10 15 2005 13095.4 3.4 295.507 44,314 190.70 3.4 795 1,476 10 15 2006 13857.9 2.7 298.145 46,444 198.30 3.2 927.5 1,727 11 16 2007 14480.3 1.8 300.807 48,070 202.42 2.9 1,024 1,869 12 16 2008 14720.3 -0.3 303.492 48,407 211.08 3.8 1,291 2,112 13 17 2009 14417.9 -2.8 306.202 46,999 211.14 -0.4 1,069 1,575 11 14 2010 14958.3 2.5 308.936 48,358 216.69 1.6 1,270 1,903 12 16 2011 15533.8 1.8 322.3 49,855 220.22 3.2 1,497 2,236 14 17 TABLE 2: Brazil (1) (2) (3) (4) (5) (6) (7) (8) (9) (11) (12) Year GDP in billion US$ GDP % growth Pop. In millions Per Capita GDP in US$ CPI Inflation Rate (P%) Exports in billion US$ Imports in billion US$ Exports % of GDP Imports % of GDP 1997 871.2 3.4 158.3 5,219 159.10 6.9 44.9 45.8 7 9 1998 843.8 0.0 162.5 4,979 161.60 3.2 47.5 46.5 7 9 1999 586.8 0.3 166.8 3,412 164.30 4.9 46.9 48.7 9 11 2000 644.7 43 169.5 3,694 168.80 7.0 55.1 55.8 10 12 2001 553.5 1.3 174.4 3,128 175.10 6.8 56.3 56.8 12 13 2002 504.2 2.7 176 2,811 177.10 8.5 57.8 57.7 14 13 2003 552.4 1.1 182 3,040 181.70 14.7 59.4 46.2 15 12 2004 663.7 5.7 184.1 3,607 185.20 6.6 73.28 48.25 16 13 2005 882.1 3.2 1859 4,739 190.70 6.9 95 61 15 12 2006 1,088.9 4.0 188 5,788 198.30 4.2 115.1 78.02 14 11 2007 1,366.8 6.1 190 7,194 202.42 3.6 137.5 91.4 13 12 2008 1,653.5 5.2 196.3 8,623 211.08 5.7 197.9 173.1 14 13 2009 1,620.1 -0.3 198.7 8,373 211.14 4.9 153 127.7 11 11 2010 2,143 7.5 192.7 10,978 216.69 5.0 199.7 187.7 11 12 2011 2,476.6 2.7 203.4 12,576 220.22 6.6 256 219.6 12 13 Source: http://data.worldbank.org Brazil has an economic freedom score of 56.9, which is significantly lower than that of the United States of America that stands at 75.5. The implication of these figures is that the United States is position 12 in the list ranking nations according to the freeness of their economies while Brazils is position 114. I terms of freeness o economy, the United States beats Brazil by a big margin. Perhaps the reason Brazil did poorly in the ranking is the drop in labor trade, fiscal, and monetary freedoms. The United States also experienced a decline because of changes in business and property rights. Both Brazil and United states have declined, in terms of the freedom of their economies, than their counterparts within the region (Lo & Hiscock, 2014). Gross Domestic Product (GDP) plays a primary role as far as the measure of the strength of an economy is concerned. The nominal Gross Domestic Product (GDP) ought to be in a progressive mode for the economy of a country to grow. The Gross Domestic Product (GDP) rate of growth for Brazil stood at 2.3% in 2013 while that of the United States was 3.5 in the 2014 audit. It implies that the Gross Domestic Product (GDP), and to an extension the economy, of the United States is growing at a higher rate than that of Brazil. Considering the level of industrialization and economic history of the two countries, it is fair to insinuate that Brazil’s economic performance is fair relative to that of the United States (Heritage.org, 2014). A notable difference in the economy of the United States and that of Brazil emerges when one assesses the balance of Trade (BoT) of the two countries. Fundamentally, a trade balance is the difference between a country’s exports and imports. If the value is positive, then the country is said to have a trade surplus, and when it is negative, the country has a trade deficit. In 2012, Brazil had a trade surplus of $17.2 billion while the United States of America had a trade deficit of $ 740 billion. It means that the United States imports more than it exports while Brazil exports more than it imports. The implication of this scenario is that Brazil brings in more foreign exchange while the United States loses the same. The discrepancy may have arisen out of difference in production costs and non-tariff barriers (Teller-Elsberg, Folbre, & Heintz, 2012).  Currently, the inflation rate stands at 6.52% in Brazil while the inflation rate of the United States is 1.7%. Inflation rate affects the balance of trade of any given country. Although the United States had a trade deficit of $ 740 billion as compared to the $17.2 billion trade surplus of Brazil, it is worth noting that the United States has more revenue that its expenses. The inflation rate of Brazil has remained relatively stable for the last five years although the United States inflation rate in much lower. The U.S. Dollar is an international currency and its stability across regions determines the stability of the U.S. inflation rate. Since the U.S. Dollar is much more stable than the Brazilian Real, the inflation rate of the United States has followed suit to remain more stable than that of Brazil and other countries within the region (Claitors Law Books and Publishing Division, 2014). In 2013, only 14.5% of the population of the United States survived below poverty line out of the whopping 316.7 million Americans. World Bank reports revealed that 81.28% of the U.S. population was urban-bases, implying that industrialization drives the United States economy. On the other hand, agriculture and mining are the primary factors of production that drive the Brazilian economy (Teller-Elsberg, Folbre, & Heintz, 2012). The economy of the United States depends heavily on the service industry apart from the manufacturing industry. The U.S. is a first world nation unlike Brazil that is an upper-middle-income country with a rapidly expanding economy. The service sector employs over 80% of labor force in the United States compared to about 70% in Brazil (Claitors Law Books and Publishing Division, 2014). Perhaps revenue is also a primary determining factor when it comes to the economies of the two countries. In 2013, revenue made up 31.59% of the U.S. Gross Domestic Product while its expense amounted to 32.5% of the Gross National Product. The two figures were almost equal although there was a small discrepancy that the U.S. government can amend using its fiscal policies. When it comes to Brazil, it is worth noting that the revenue made up 37.22% of the Gross National Product while the country’s expenses amounted to 40.01% of its Gross Domestic Product (GDP). The implication of these figures is that Brazil spends a huge chunk of its Gross Domestic Product (GDP) c it brings in terms of revenue. This trend is not healthy, especially for an upper-middle-income country that is fast developing (Heritage.org, 2014). The rate of exchange of currency also affects the strength of the economy of that country. For example, the U.S. economy is stronger than that of Brazil because the United States has a stronger currency, perhaps one of the strongest currencies in the world. The currency of the United States, which is the USD or U.S. $, enjoys international adoption and stability. Many countries and organizations prefer to conduct their transactions using the U.S. Dollar. The latest exchange rate for the U.S. Dollar is U.S. $1 per U.S. $1. In contrast, the Brazilian currency, Brazilian Real (BRL), is currently exchanging at 2054BRL against the US Dollar. It means that the USD is stronger than the BRL. Perhaps the major reason for the difference is the international acceptance and adoption of the USD by many agencies and countries as a means of exchange. The Brazilian Real has limited usage since it is widely used in Brazil and some Latin American countries only (Heritage.org, 2014). Unemployment rate between the two countries proves that the United States has a bigger economy that is beneficial to its citizens and the world. In March 2014, the unemployment rate of Brazil was 5.03%, which was up from 4.3% in December 2013. Conversely, the unemployment rate in the United States as at October 2013 stood at 5.8%. It is important to consider that in 2012 alone, the United States received over 5 million immigrants. Besides, the 5.8% is a smaller percentage relative to the huge population of the United States that currently stands at 316.27 million people. Besides, the United States interacts with more trade organizations than Brazil besides the fact that the World Trade Centre has its headquarters in New York. Overall, the two economies, Brazil and the United States, have huge economies and they their economies are performing exemplarily relative to those of other countries within their respective regions. Nonetheless, it is imperative to note that one may get the wrong impression when they compare the economy of Brazil to that of the U.S. because on is an upper-middle-income country while the other is a first world country (Teller-Elsberg, Folbre, & Heintz, 2012). References Claitors Law Books and Publishing Division. (2014). The World Fact book 2013-14. New Jersey: Claitors Pub Div. Global Edge. (2014). Brazil: Economy. Retrieved from http://globaledge.msu.edu/countries/brazil/economy Heritage.org. (2014). 2014 index of economic freedom. Retrieved from http://www.heritage.org/index/country/brazil Lo, V. I., & In Hiscock, M. E. (2014). The Rise of the BRICS in the Global Political Economy: Changing Paradigms? Cheltenham: Edward Elgar Publishing. Rohter, L. (2012). Brazil on the rise: The story of a country transformed. Basingstoke: Palgrave Macmillan. Teller-Elsberg, J., Folbre, N., & Heintz, J. (2012). Field Guide to the U.S. Economy: A Compact and Irreverent Guide to Economic Life in America. New York: New Press. World Data Bank (2014). GDP growth (annual %). Retrieved from http://data.worldbank.org Read More