• First, an education:
  • The country’s land mass is approx 90% the area of the USA (big) – 3.1M sq mi (Brazil) vs 3.5M sq mi (USA).
  • Population: almost 200M people. (5^th most populous country)
  • Language: Portuguese
  • Main religion: catholic (almost everyone)
  • Government: democracy
  • Currency: real (pronounced re-Al)
  • GDP in USD: approx $1T. about the same size as India’s. About 10^th largest on the planet.
  • Largest city: Sao Paulo 19M people
• Now, the good stuff (note I am comparing to the USA because you will understand the numbers better if given a reference point you already know):
• Demographics:
• The population is growing. The US population growth rate is very close to 0. Most modern industrialized countries are seeing 0 population growth or outright population contraction – in the case of most of Europe.
• A large portion of the population is young. 28% is under age 15 / 8.8% is over age 60. Compare to USA: 20.8% under age 15 / 16.6% over age 60. This is a HUGE advantage for Brazil over the next century!
• In the past 7 years, the number of poor have been slashed in half. Now 52% of the population is middle class. That’s a large market – 100M people.

• Natural resources:
  • Brazil is rich in commodities of every sort and is one of the world’s largest commodities exporters.
  • Currently Brazil imports about 12% of its energy needs (USA imports 29% and growing).
  • Brazil’s energy importing needs will go to 0 in the next few years as they develop the world’s largest new oil & gas find in many years.

• Banking System
  • Its banks make piles of money because the spread between the rate banks borrow & lend is larger than any other industrial country. Not a single bank has had stress over the global credit crunch. Foreign banks see their Brazilian branches as their most profitable.
  • Brazil is shifting from US dollars for foreign trade to their own currency. That is a VERY powerful statement about the Brazilian real and a weak statement about the US dollar.    
• Details of GDP:
  • Brazil has balanced annual budgets and trade surpluses. (who knows if we’ll ever see that here)
  • 55% of GDP is from consumer consumption – similar to most of Europe & Canada. The US has seen the consumer represent 60% of GDP for a very long time, then over the past decade or so it has crept up to an unsustainable 70%.
  • Both the US & Brazil have governments consume 19% of GDP.
  • GDP contribution from exports is +4.4% in Brazil but – (minus) 5.8% for the US.
  • Brazil now has more trade with China than with The USA. China is investing $10B in Brazil’s public oil & gas company – Petrobras.  

• Healthcare: Brazil spends the same portion of their GDP as other modern economies – about 9%. The US spends over 15%!!! (Hmmmm, what is the 1 thing that the US has that all the other modern western countries don’t have: Health Insurance companies. More food for thought.)

With such a long and steady climb in the standard of living, Brazilian banks now offer 30-year mortgages. This is a sign of optimism about long term growth and was not possible previously. Brazilians and their government learned hard lessons both from the Latin American banking as well as Asian banking crises of the past 15 years. They learned that foreign money will flee the country when things turn bad. They also learned that bail-out terms from the IMF are sufficiently painful that they do not want to go through those experiences again. So they have gone through years of painful economic policies to make their economy more healthy, and the society more responsible.

Sooner or later we’ll be forced to have a REAL fiscal conservative in power because no one will buy the mountains of bonds we’re selling. China & Russia are working hard to make the USD no longer the world’s reserve currency. Then what will we do for artificially low interest rates ?