Case Analysis

Please refer to the case and find the following:

Q1 - Executive Summary Please provide brief background to the case and an outline of its problems. (Summary of the report proposed solutions and recommendations)

Q2- Please provide Identification and analysis of problems, including underlying cause

There are two faces of development in Brazil. World-competitive industry coexists with stagnant, protected sectors. Modern agriculture coexists with low-productivity traditional practices.

But Brazil is amid a spurt of economic development that might herald a lasting transformation for a country often considered synonymous with inequality and unmet potential. Economic growth has returned, health and education have improved markedly, the country's democratization has proved durable, and inequalityamong the highest in the worldhas at long last started to fall. But there is still a long way to go to achieve genuine development in Brazil.

Many Brazilians have been frustrated with the uneven pace of development. They are known for Telling self-deprecating jokes such as "Brazil is the country of the futureand always will be." Brazil has Even been cited as having experienced" growth without development." But despite massive inequities, Brazil has made economic and social progress and should not be tarred with the same brush as Pakistan, Saudi Arabia, or Gabon, which have had less social development for their levels of growth and investment. Extremely high economic inequality and social divisions severely threaten further progress in Brazil. But there are growing reasons to hope that Brazil may overcome its legacy of inequality so that the country may yet join the ranks of the developed countries.

Brazil is particularly interested because its growth performance from the 1960s through the early 1980s was the best in Latin America, with at least some parallels with East Asian export policy and implementation. However, Brazil had a more significant role for state-owned enterprises, much lower education and other social expenditures, and much higher inflation.

Brazil's performance is followed widely in the developing world, as it is the largest and most populous country in Latin America; with some 193 million people, it is the world's fifth-largest country in both area and population. Brazil is consolidating its role as the lead country in the Latin America and Caribbean region; it is a vital member of the G20leading economies addressing the aftermath of the financial crisis; and one of a group of developing countries pushing for fairer international trade rules. It is one of four influential countries referred to by financial analysts of emerging markets as the "BRICs" (Brazil, Russia, India, and China.

Although over two decades of military rule ended in Brazil in 1985, an ongoing debt crisis,years of stagnant incomes, and extremely high inflation followed. It took drastic policies to reduce inflation, and revenues stagnated in the aftermath. The 1980s and the 1990s have been described as "lost decades" for development. So the recent signs of palpable progress, especially since about 2004, have been welcomed with relief and growing enthusiasm among many Brazilians. Although the country remains politically divided between the centre-left and the centre-right, astriking convergence has been achieved on policies agreed to be necessary for equitable and sustained growth, ranging from active poverty reduction programs to relatively orthodox monetary policies. The economy has been booming due to commodity exports to China, including soybeans and steel. One persistent worry is whether the economy could continue to increase if commodity prices, which have been much higher in recent years, revert to their long-term trends for the decline.

But despite the nation's early and now resumed growth, other development indicators in Brazil lagged, eventually undermining growth prospects. It would seem that Brazil benefited from much higher incomes than Central American countries and spared the destructiveness of civil war, it would seem, should have been in a much better position to fight extreme poverty and improve economic equity and social indicators. Instead, the country has continued to see a higher percentage of its population in poverty than expected for an upper-middle-income country. Despite some recent improvements, Brazil remains one of the countries with the highest levels of inequality globally. So how should Brazil's development performance be evaluated and future priorities chosen?

Income and Growth

Growth is generally necessary, though not sufficient,for achieving development. In 2007, Brazil's per capita income was $5,860. Using purchasing power parity, its average income was $9,270,about one fifth of that of the United States but more than eight times that of Haiti (World Bank data).

Growth has been erratic, with substantial swings over time. Data for gross domestic product growth (GDP) per capita are sometimes presented for the periods 19651990, when for Brazil, it was 1.4%,and for 19902000, it was 1.5%. This appears to suggest remarkable stability. But the former figures combine the booming years from 1967 to 1980and Brazil's "lost decade of development" of the1980s. Nevertheless, performance through this period was still better than most other countries of Latin America. And in 20002008, annual per capita growth rose to 2.6% (World Bank data)

Brazil has had an export policy stressing incentives for manufacturing exports and protections for domestic industry, with numerous parallels with Taiwan and South Korea in their earlier formative stages. Its percentage share of manufactured exports in total exports grew dramatically, reaching 57% in 1980, although it dropped markedly during the lost decade of the1980s. Although the share of exports increased again to get 54% by 2000, these still essentially represented processed foods and ores. By 2007, this figure had fallen to 47%, reflecting increased commodity prices; manufactured exports also continued to rise. Brazil's prolonged status as a highly indebted country was a substantial drag on growth performance, as were continued problems with infrastructure. Today, however, the Industrial, Technological and Foreign Trade Policy (PITCE) program is actively working on upgrading the quality and competitiveness of Brazilian industry.

Social Indicators

Brazil's human development statistics compare unfavourably with many other middle-income countries such as Costa Rica and quite a few low-income countries, let alone the advanced industrialized countries. As of 2007, Brazil ranked 75th on the United Nations Development Program's 2010 Human Development Index, four positions lower than would be predicted by its income.

In Brazil, life expectancy at birth in 2007 was 72years, compared with 79 in South Korea. Brazil's under- 5 mortality rate is 22 per 1,000 live births, compared with 11 in similar-income Costa Rica and just 6 in Korea (World Bank data). Although the child mortality rate is relatively poor by the standards of comparable countries today, Brazil, like most developing countries, has made significant progress from 1960, when its rate was 159 per 1,000. But about 7percent of all children under the age of 5 still suffer from malnutrition in Brazil (World Bank data).

Brazil suffers from a high incidence of child labour for its income level, as a World Bank study and reports by the International Labor Office have underlined. Despite officially eradicating child labour as a priority, as many as 7 million children still work in Brazil. (For an analysis of child labour problems and appropriate child labour policies.) Brazil's officially reported adult literacy rate in education has risen to 90% (independent observers have concluded that Brazil's adequate literacy is under 50%). At the same time, that of similar-income Costa Rica is 96%. Helping explain this difference, six years of school attendance are mandatory in Costa Rica, and 99% attendance is reported.

Only primary schools endup being relatively targeted to the poor, not because the government succeeds in targeting resources but because more affluent households send their children to private schools. Public secondary and tertiary education expenditures are very poorly targeted to the poor. For scholarshipschiefly to graduate studentsfour-fifths of the money goes to the wealthiest fifth of the population.

Poverty

Perhaps the most critical social indicator is the extent of extreme poverty among a country's people. Poverty has been high in Brazil for an upper-middle-income country. There has been progress; a World Bank study found that Brazil's average per capita income grew by 220% in the high-growth years from 1960 to 1980, with a 34% decline in the share of the poor in the population. On the other hand, similarly sized Indonesia grew 108% from 1971 to 1987, with a 42% decline in poverty incidence. And some of the ground gained on poverty was subsequently lost in Brazil in the 1980s and 1990s. According to World Bank estimates, in 2005,some 18.3% of the population of Brazil lived on less than $2 per day.

And 7.8% lived in extreme poverty, with incomes below $1 per day (WorldBank, 2007 Global Monitoring Report), worse than some low-income countries such as Sri Lanka. But this may be an underestimate.

Inequality

For decades, Brazil's inequality in income (as well as in land and other assets) has ranked among .The worst in the world. High inequality not only produce social strains but can also ultimately Retard growth. The degree of income inequality in Brazil is reflected in the low share of income going to the bottom 60% and the high percentage to the top 10% of the population. the top 10% of income earners receive about 43% of national income, while the bottom 40% receive just 10%. In recent years, inequality in Brazil has moderated, but these figures still make the inequality in Brazil among the highest in the world. The UNDP concludes that high inequality is the reason for the high level of extreme poverty and the prolonged rate of poverty reduction.

Land Reform The land is unequally distributed in Brazil, and there is an efficiency and a social equity casef or land reform. But land reform has been repeatedly blocked in Brazil by the political power of large plantation owners (fazenderos). In response, impoverished farmers in the "landless movement," or MST, have increasingly seized land, often arable but unused land within large plantations. Thousands of families have taken part. Farmers have also settled in fragile rainforest areas, finding themselves unable to acquire land in the regions that are more agriculturally suitable and less ecologically sensitive. In response,the government has initiated a land reform program, but the results to date have been modest regarding the scope of the problem.

Sustainability of Development

Deforestation of the Brazilian Amazon rain forest displays conflicts between short- and long-term development goals and the consequences of enormous inequality and state intervention on behalf of the rich. The growth that relies on running down the natural environment is contrasted with sustainable development, which preserves the ecology on which future income and people's health vitally depend.

But Brazilians across the political spectrum appear determined not to acknowledge the destruction of forests as a genuine or pressing problem. Despite their destructiveness, economic activities in the Amazon often benefited in the past from ill-conceived subsidies, which are now curtailed. Grandiose showcase development projects and schemes, such as subsidized ore mining, charcoal-consuming industries, and cattle ranching, were carried out on a largescale.

Encouraging rainforest settlement seemed to be a politically inexpensive alternativeto land reform. In the end, the best lands became concentrated in the hands of significant, influential farmers. The rights of indigenous peoples were flagrantly violated, with some terrible atrocities committed by settlers.

Ecological campaigners and activists among rubber tappers whose livelihoods were threatened were attacked and sometimes murdered. In the meantime, much of these fragile lands appear to have become irreversibly degraded. Many of the subsidies have now been withdrawn, and at least some protections and "extractive reserves "have been put in place, but rainforest destruction is hard to reverse.

Problems of Social Inclusion

Few discussions about poverty in Brazil pay much attention to race. But about half of Brazil's population is African or mulatto heritage. As a result, it is sometimes noted that Brazil is the world's most prominent black nation after Nigeria. And most of the poor in Brazil are black or mulatto. Although Racial discrimination is a crime in Brazil, no one has ever been sent to jail for it. According to one estimate, the average black worker receives only 41% of the salary of the average white worker. Most Brazilians living in the worst favelas, orshanty town slums, are black. The endemic extreme poverty of the Northeast, which has lagged development standards of the Southeast for decades, afflicts