Brazil’s Economy Sambas Past Brits, Creeps up on France and Germany

Originally published by Politic365 here.  

Once known only for its beautiful vacation spots (and people), Carnival festivities, and ability to breed the best footballers in the world, Brazil has become what most thought it never would:  an economic powerhouse.

That’s Brazil, the country of the secluded Amazonian natives, some of the worst ghettos on Earth, one of the highest murder rates in the Western Hemisphere, and average household incomes of around $10,000 per year.

According to the Centre for Economics and Business Research, Brazil’s economy, which has been growing at twice the rate of Western European countries, did a Robihno pullback to pass its soccer rival and gain the number six slot this year.  Brazil’s GDP came in at just over $2.5 trillion, while the U.K.’s slow growth kept it just under that mark.

Brazil’s finance minister further stated that, if the current trajectory of growth continues, Brazil will likely “pass France in a few years and Germany within a decade.”

The spoiled citizens of Western Europe are quickly being overtaken by Brazil’s resulting hunger for the finer luxuries that we take for granted in Western, middle-class culture. Besides being famous for its ability to manufacture some of the best bodies on Earth, Brazil’s nouveau riche are spending more than almost any other country on real estate and tourism in New York City, Miami, and other tourist destinations.

Yet, with an average income of only $10,000 per citizen, many wonder what Brazil’s secret is.  There really is no secre:; Brazil has converted to become one of the freest markets in Latin America, allowing for large amounts of foreign investment, intense growth in diversified industries, and opportunities for expansion and business development not seen in other developing countries.

In a nutshell, Brazil, who has suffered under oppressive economic systems of government in the past, has decided open up for business, allowing the free market to trump government intervention.

And it’s paying off for the country whose previous main export was the Soccer Phenom.  With annual GDP growth continuously topping 5%, compared to the U.K. at 1.3% and the U.S. at 2.9%, it is making quick gains on the world’s other economic power houses.  Its debt-to-GDP ratio has also fallen to the lowest it’s been since 1998, allowing for better credit ratings, which has caused the central government to drop prevailing interest rates, hence creating an attractive environment for business investments.

With a strengthening real, Brazilians have begun importing and shopping overseas more, becoming some of the most loved tourists in the world.

On the other hand, U.K.’s GDP growth is pitiful and is effectively wiped out by its inflation rate.  The Pound has taken a beating, alongside the Euro, mostly due to the debt crisis and fears over Europe’s future economy.   As government spending has risen in from 37% to 48% in 2010, their debt-to-GDP ratio has become nearly double that of Brazil, decreasing its credit rating outlook, increasing interest rates, and reducing the attractiveness of investment opportunities.

Combined with significant increases in personal and corporate taxes and dramatic increases in business regulations, the U.K. has ushered in a more restrictive economic environment than it has in years.  The Heritage Foundation/Wall Street Journal Index of Economic Freedom, backs up the claim that the biggest reason for the lack of growth has been its reduction in economic freedom, placing the former economic Leviathan outside of its top ten for several years in a row.

On an ironic note, that perhaps epitomizes the wasteful economic philosophy of the U.K., the Brits are still sending millions of dollars in aid to Brasilia, despite now being the poorer of the two.  How do you say “sucker” in Portuguese?

To be fair, despite the seemingly dramatic swing, the average U.K. citizen is still as “rich” as the average American.  While complaining about the lack of economic opportunities, the average British citizen has flat-screen TVs, cars, and yearly tropical vacations.  The average Brazilian, on the other hand, tends to get that “movin’ on up” feeling from The Jefferson’s after getting electricity and hooking up his first refrigerator.

Although recent economic policies have shifted to favor the economic climate of the former European colony, the new U.K. leaders are expected to implement some of the same practices that have given Brazil the edge in 2011.

We’ll see who comes out with the bragging rights for 2012, both at Wembley Stadium and on the world’s economic stage.

Justin Vélez-Hagan is Senior Contributing Writer and Commentator for Politic365.  He is also the National Executive Director of The National Puerto Rican Chamber of Commerce, an international developer of senior living facilities, and is a reservist in the U.S. Air Force.  He can be reached at Justin@Politic365.com.