Brazil Table of Contents
After 1987 problems that had confronted industry earlier in the decade intensified, adverse macroeconomic conditions persisted, and political troubles affected expectations adversely. Until the end of the 1980s, industry relied heavily on government protection and favors, but it also faced pervasive regulations and extensive governmental interference. These factors had a deleterious effect on industrial investment and on the productivity of several industrial subsectors, increasingly blunting the competitive edge they had struggled to achieve in the world market. Moreover, as a result of the fiscal crisis, the government was hard-pressed to continue to provide support and subsidies for industry and to maintain and expand the country's infrastructure.
The Collor de Mello administration, inaugurated in 1990, introduced significant changes in Brazil's economic strategy. Regarding industry, the government implemented measures to eliminate regulations, to liberalize trade, and to markedly reduce governmental favors and subsidies. It also announced a series of actions aimed at increasing industry's competitiveness. Despite these efforts, political and macroeconomic difficulties prevented the effective implementation of the new strategy, and the mounting fiscal crisis dampened efforts to rebuild and improve the badly deteriorated infrastructure. Therefore, an important part of the industrial sector failed to recover and to modernize. With stagnation, the domestic market could not give industry a dynamic push. Moreover, the reduction in investment, coupled with the deteriorating infrastructure, led to declines in competitiveness. These developments, together with fewer import barriers, caused industry's balance of trade to decline, from a peak of US$16.3 billion in 1988 to US$11.1 billion in 1991. In the early 1990s, despite sectoral weaknesses, the industrial sector became a major contributor to the country's exports and trade surplus.
Since the early colonial period, expectations have loomed large about mineral riches hidden in Brazil's vast territory. However, the full extent of the country's mineral wealth is still unknown. Various efforts have been made to survey the country, one of which uncovered the Greater Carajás mineral province in the eastern Amazon (see fig. 9). Yet, at the beginning of the 1990s only 10 percent of the country's subsoil was known in sufficient detail. Correspondingly, the share of mining in GDP has increased but remains small; in 1950 it was only 0.4 percent, rising to 0.8 percent in 1970, to 1.0 percent in 1980, and to 2.5 percent in 1986, but declining to 1.5 percent in 1990.
The value of mineral production expanded from US$5.4 billion in 1980 to US$13.0 billion in 1990. However, only ten minerals--crude oil, iron, gold, calcium ore, natural gas, bauxite, phosphate, granite, cassiterite, and zinc--accounted for 85.5 percent of this total; crude oil alone accounted for 37.6 percent of the total, and both iron ore and gold accounted for 11.4 percent each. Apparently, the exploration of several other mineral substances has great potential, but such efforts have yet to be realized.
Advances in the early 1990s included the Greater Carajás project, which involves the production and export of iron ore, products of the bauxite-aluminum complex, and manganese, among other minerals. Overall, exports of mineral products expanded substantially, and there was a considerable import substitution of mineral inputs. In 1974 the trade balance of the mineral sector (primary, semiprocessed, and manufactured minerals) was a negative US$2.5 billion, and the deficit increased, reaching US$10.7 billion in 1980. However, by 1985 the deficit had declined to US$0.6 billion and thereafter the trade balance showed growing surpluses (US$1.1 billion in 1988, US$1.3 billion in 1989, and US$1.6 billion in 1990). This reversal was caused by an expansion of exports, especially of iron ore, products of the bauxite-aluminum complex, and manganese, and to a significant extent by reductions in crude oil imports.
Brazil's mineral policy has been marked strongly by national security considerations. Until the early 1990s, foreign capital was mostly barred from the more attractive portions of the sector. Petroleum has been a state monopoly. Another state enterprise, the giant Rio Dôce Valley Company, Inc. (Companhia Vale do Rio Dôce--CVRD), has a large share of the iron ore deposits, and it has played an important role in the development of the bauxite-aluminum complex and of other minerals. CVRD is also a major railroad and shipping operator, by far Brazil's largest exporter, and its largest generator of foreign currency. In late 1994, foreign investment funds held about 10 percent of CVRD's stock. In 1995 there were still legal obstacles to foreign participation in Brazil's mineral sector.
Data as of April 1997
Brazil Table of Contents