The two largest economies in the Western Hemisphere are the United States and Brazil.

As an emerging market economy and global player Brazil has made strong macroeconomic decisions that have led to economic growth. This is evident by looking at the macroeconomic factors of Brazil such as its gross domestic product, GDP per capita, growth rate, unemployment, and rate of inflation1. When looking at the conditions of growth for Brazil in relation to its economic status, how does it compare to a developed country such as the United States? First lets take a look at the GDP of Brazil and the United States. The gross domestic product (GDP) tells us the total market value of final goods and services within an economy for any given year. (O'Sullivan, Sheffrin & Perez, 2012) This is beneficial since it gives us a measure of an economys total output, how healthy is the economy, is it growing, stagnate or decreasing. According to the World Bank the GDP in the United States in 2007 was $13.96 trillion dollars and rose to $15.09 trillion dollars at the end of 2011. While Brazil has a much lower GDP it saw a GDP in 2007 of $1.36 trillion rise to a GDP of $2.48 trillion by 2011. When looked at as a percentage the United States had a growth rate of 1.91% in 2007 decreasing to -3.53% in 2009 before showing an increase to 3.02% in 2010 and 1.7% in 2011. Brazil showed a GDP growth rate of 6.09% in 2007 and decreasing to -0.33% in 2009 and increasing to 7.53% in 2010 and 2.7% in 2011. This data shows exactly what was happening to each country during the economic crisis that affected the global economy in 2008. When the economic crisis occurred and there was an increase in unemployment consumers had less disposable income to purchase goods and services. As a result there was less being produced in each country. Due to

All data relating to GDP, CPI, unemployment, inflation, growth rate, etc obtained from The World Bank

the production levels being down each country respectively saw a decrease in gross domestic product. The fact that the recession caused the gross domestic product of Brazil and the United States to decrease shows that the goods and services were being produced at a reduced rate then before the economic crisis. As stated this is directly related to the unemployment rate and the reduced amount of goods and services that consumers were able to purchase. In 2007 the United States unemployment rate was 4.4%. However once the economic crisis occurred the US unemployment rate rose to 10.6% by the end of 2009. As we saw from the earlier data this correlates with the GDP growth rate in the United States decreasing from 1.91% in 2007 to -3.53% by the end of 2009. However in 2010 the unemployment rate started to decrease and its at the current rate of 7.5%. This again correlates directly with the GDP and can be seen f rom the fact that in 2010 the United States GDP growth rate was 3.02% and 1.7% in 2011. However Brazils unemployment was not affected as strongly by the economic crisis as was the United States. In 2007 Brazil had an unemployment rate of 9.29%. Brazil saw a decrease in unemployment in 2008 to 7.9% but had an increase to 8.1% in 2009. In 2010 Brazil saw its unemployment rate fall to 6.7% and again to 6% in 2011. As Brazil had positive GDP growth in 2010 and 2011 it was producing more goods and services and as such required more employees so that unemployment fell. While measure overall GDP can give us a look at the health of the a country, it doesnt really say anything about the citizens of that country and how they are benefitting. To do this we need to take a look at the GDP per capita of Brazil and the United States. In 2007 the United

States had a GDP per capita of $46,349. As mentioned early the economic crisis played a large role in the United States and as such the GDP per capita in the US decreased to $45,191 in 2009. However by 2011 the GDP per capita had increased to $48,441. The United States has had relatively low per capita growth rate over the last 5 years with growth rates of 0.9%, -1.3%, -4.4%, 2.2% and 1.0% respectively. The United States population has seen little increase in living standards due to relatively low increases in GDP per capita. When looking at Brazils GDP per capita we can see that Brazil felt little impact from the economic crisis. In 2007 Brazil had a GDP per capita of $9,768. However unlike the United States which saw a decrease in GDP per capita from 2007 to 2009, Brazil realized a 6.34% increase to raise the GDP per capita to $10,388. By 2011 Brazil had further raised its GDP per capita to $11,719 or increased it by a further 12.8%. The inflation rate of Brazil and the United States economy can be used to show how the economic growth of each of these two countries occurs. Economists generally agree that mild inflation is good for the economy. The United States has seen inflation rates of 2.85% in 2007, 3.84% in 2008, -0.36% inflation in 2009, 1.64% in 2010 and 3.16% inflation in 2011. Brazil has seen inflation of 3.64% in 2007, 5.66% in 2008, 4.89% in 2009, 5.04% in 2010 and 6.64% in 2011. Because Brazil is an emerging market we expect to see higher rates of inflation then we would in a developed country such as the United States. This can be seen by comparing the consumer price index (CPI) of each country. With a base year of 2005 equal to 100 we have a CPI of Brazil in 2007 of 107.97 increasing to 134.03 in 2011. However with the same base year data in the United States we see a CPI in 2007 of 106.17 and only increasing to 115.18 by 2011.

When the economic crisis struck in 2007 our data shows that the United States was struck harder than Brazil. One of the reasons for this was that Brazilian banks were less exposed to the United States mortgaged-backed securities market, which is where the crisis started. Also because Brazil had a low unemployment rate and depended on less trade as part of its GDP it was able to keep demand for Brazilian products up. Although Brazil did have to give a stimulus package equal to 1.7% of its GDP to boost the economy it was nowhere near the stimulus package that United States had to give to boost its economy which was 7% of its GDP. Brazil will be able to continue to maintain its status as an emerging market and show economic growth due to several reasons. Brazil has been able to develop its infrastructure; this includes developing its roads, ports, and technology. By developing the infrastructure Brazil can reduce social exclusion and expand the potential for economic expansion to neglected areas. Brazil has also reduced poverty and inequality. At the latest count in 2009 Brazil showed that 21.4% of its population lived below the poverty line. While this might seem like a large portion of the population it shows drastic increases from 2005 and 2008. In 2005 Brazil showed 31% and in 2008 it showed 26% of the population lived under the poverty line. This is drastically different then the United States which has seen a rise in the population living below the poverty line. In 2005 the U.S had roughly 12.5% of the population living under the poverty line while in 2010 it had increased to 15.1% Brazil has also increased its openness to the world. Brazil has opened itself to new international trade and foreign investment policies. Brazil has made it easier and more secure for foreign investors to invest in the Brazilian economy by combing exchanges and by having the largest Latin American exchange. Furthermore Brazil brought up the standards and disclosure requirements for listing on the exchange to make it in

line with the other large markets around the world. Brazil has also implemented institutional reform. By reforming the government institutions Brazil has more them more efficient for its citizens as well as foreign investors Due to these changes that Brazil has gone about making over the last few years it has experienced substantial economic growth. As we have shown, it has increased the GDP, increased the GDP per capita, reduced unemployment to an all-time low, and is bringing more and more citizens out of poverty. However for Brazil to continue to grow it still needs work on inequality. The top 10% of Brazils population accounts for 43% of the consumption while the lowest 10% account for only 1.1%. (Williams, April) Inequality is a main issue that needs to be
addressed in the future for Brazil.

Works Referenced
Williams, S. (April, 2012). Why is brazil an emerging market economy?. Retrieved from http://ebook.law.uiowa.edu/ebook/uicifd-ebook/why-brazil-emerging-market-economy O'Sullivan, A., Sheffrin, S., & Perez, S. (2012). Economics principles, applications, and tools. (Seventh ed.). Prentice Hall. http://www.worldbank.org/

United States and Brazil Macroeconomic Conditions Robert Bullard University of St. Thomas MBA 5x06 Professor S. Lutafali