BRAZIL

Federative Republic of Brazil

República Federativa do Brasil

CAPITAL: Brasília

FLAG: The national flag consists of a green field upon which is a large yellow diamond twice as wide as it is high. Centered within the diamond is a blue globe showing constellations of the southern skies dominated by the Southern Cross. Encircling the globe is a white banner bearing the words Ordem e Progresso.

ANTHEM: Hino Nacional Brasileiro, beginning "Ouviram do Ipiranga" ("Listen to the cry of Ipiranga").

MONETARY UNIT: On 1 July 1994, the real (r$), a paper currency of 100 centavos, replaced the cruzeiro real (cr$). r$1 = us$0.40161 (or us$1 = r$2.49) as of 2005.

WEIGHTS AND MEASURES: The metric system is the legal standard, but some local units also are used.

HOLIDAYS: New Year's Day, 1 January; Tiradentes, 21 April; Labor Day, 1 May; Independence Day, 7 September; Our Lady of Aparecida (Patroness of Brazil), 12 October; All Souls' Day, 2 November; Proclamation of the Republic, 15 November; Christmas, 25 December. Movable holidays include the pre-Lenten carnival, usually in February, Good Friday, and Corpus Christi.

TIME: At noon GMT, the time in Fernando de Noronha is 10 am; Río de Janeiro, 9 am; Manaus, 8 am; Río Branco, 7 am.

LOCATION, SIZE, AND EXTENT

Situated on the east-central coast of the continent, Brazil is the largest country in South America and the fourth-largest in the world in coterminous area, ranking after Russia, Canada, and China (the United States is larger with Alaska, Hawaii, and the dependencies included). Occupying nearly half of the South American continent, it covers an area of 8,511,965 sq km (3,286,488 sq mi), extending 4,395 km (2,731 mi) n–s and 4,320 km (2,684 mi) e–w. Contiguous with all continental South American countries except Ecuador and Chile, Brazil is bounded on the n by Venezuela, Guyana, Suriname, and French Guiana, on the ne, e, and se by the Atlantic Ocean, on the s by Uruguay, on the sw by Argentina and Paraguay, on the w by Bolivia and Peru, and on the nw by Colombia, with a total boundary length of 14,691 km (9,128 mi). Brazil is divided into 26 states and one federal district. The federal district, including the capital of Brasília, inaugurated on 21 April 1960, is surrounded on three sides by the state of Goiás and on the fourth by Minas Gerais.

Brazil's capital city, Brasília, is located in the southeastern part of the country.

TOPOGRAPHY

The northern part of Brazil is dominated by the basin of the Amazon River and its many tributaries, which occupies two-fifths of the country. The Amazon Basin itself occupies 7,049,975 sq km (2,722,000 sq mi), or about 40% of South America's total area. The Amazon River (Río Amazonas) is, at 6,436 km (4,000 mi), the world's second-longest river after the Nile, although the Amazon ranks first in volume of water carried; rising in the Peruvian Andes, the Amazon eventually empties into the Atlantic Ocean at an average rate of about 198,000 cu m (7 million cu ft) per second. The Amazon lowlands east of the Andes constitute the world's largest tropical rain forest. In the northernmost part of the Amazon Basin lies a series of mountain ranges, known as the Guiana Highlands, where Brazil's highest mountain, Pico da Neblina (3,014 m/9,888 ft), is located. South of the Amazon Basin is a large plateau called the Brazilian Highlands, ranging in elevation from 300 to 910 m (1,000 to 3,000 ft) above sea level. From the city of Salvador (Bahia) southward to Pôrto Alegre, the highlands meet the Atlantic Ocean in a steep, wall-like slope, the Great Escarpment, which in southeastern Brazil is surmounted by mountain ranges with elevations from 2,100 to 2,400 m (7,000 to 8,000 ft) above sea level.

The Atlantic coast of Brazil has no real coastal plain, but there are stretches of lowlands along the northeast coast, and there are many bay-like indentations, where Brazil's principal cities are located. Along the southwest border is a small portion of the upper Paraguay lowlands. The Paraná, Paraguay, and Uruguay rivers flow through southern Brazil; the São Francisco flows 3,199 km (1,988 mi) through northeastern and central Brazil; and the Tocantins (2,698 km/1,677 mi) empties into the Pará and from there into the Atlantic Ocean at an estuary south of the Amazon proper.

CLIMATE

Brazil is a tropical country but extends well into the temperate zone. The Amazon Basin has a typically hot, tropical climate, with annual rainfall exceeding 300 cm (117 in) in some areas; the Brazilian Highlands, which include roughly half of the total area, are subtropical. The narrow coastal lowland area ranges from tropical in the north to temperate in the south. The cool upland plains of the south have a temperate climate and an occasional snowfall. The coolest period is from May to September, and the hottest is from December to March. October to May is the rainy season. Rainfall is excessive in the lowlands and in the upper Amazon Basin, along the northern coast, at certain points on the east coast, and in the southern interior, while there are periodic droughts in the northeast. The average high temperature in Río de Janeiro in February is 29°c (84°f); the average low in July is 17°c (63°f).

FLORA AND FAUNA

As of 2002, there were at least 394 species of mammals, 686 species of birds, and over 56,000 species of plants. About one-fourth of the world's known plant species are found in Brazil. The Amazon Basin, the world's largest tropical rain forest, includes tall Brazil nut trees, brazilwood, myriad palms, kapok-bearing ceiba trees enlaced with vines and creepers, rosewood, orchids, water lilies, and the wild rubber tree.

South of the vast Amazonian forest is a mixture of semideciduous forest (mata) and scrub forests. The characteristic flora of the northeast interior is the carnauba wax-yielding palm in the states of Ceará and Piauí. To the east there are big areas of thorn scrub, the result of generally poor soils and periodic devastating droughts. Along the humid coast are many mango, cajú, guava, coconut, and jack-fruit trees, as well as large sugar and cotton plantations, the latter indigenous. Within the savanna, sparse forests, and "campos cerrados" (enclosed fields of badly deforested, populous Minas Gerais), there are various woody shrubs, lianas, and epiphytes, the staghorn fern, and an abundance of herbs, especially grasses. Brazil has many fair to good pasturage grasses, on which millions of beef cattle, not always of high grade, and some dairy cattle in the favored southern states graze.

In the southern states are exotic flowers, such as papagaias; flowering trees, such as the quaresma, which blossoms during Lent; and the popular ipê tree with its yellow petals, planted on some São Paulo streets. In the southernmost part of the Brazilian plateau forests, where temperate climate prevails, is found a mixture of araucarias (umbrella pines) and broadleaf species. The pampas of Río Grande do Sul are extensive grasslands. Maté, of economic importance as a beverage, is made from the roasted, powdered leaves of a tree harvested extensively in the southern states.

The Amazon rain forest is host to a great variety of tropical fauna, including hundreds of types of macaws, toucans, parrots, and other brightly colored birds; brilliant butterflies; many species of small monkeys; anacondas, boas, and other large tropical snakes; crocodiles and alligators; and such distinctive animals as the Brazilian "tiger" (onca), armadillo, sloth, and tapir. The rivers in that region abound with turtles and exotic tropical fish, and the infamous "cannibal fish" (piranha) is common; in all, more than 2,000 fish species have been identified.

ENVIRONMENT

A 20-year US-Brazilian project, initiated by the World Wildlife Fund, in Washington, D.C., and the National Institute for Research on Amazonia, in Manaus, studied the Amazon forest since 1978 in order to recommend appropriate measures for its protection. In 1986, it was estimated that the forests of the Amazon were being cleared for colonization, pasturage, timber development, and other commercial purposes at a rate of up to 20 million hectares (50 million acres) a year. From 1990 to 2000, the average annual rate of deforestation was 0.4% per year. A Brazilian law requiring that developers leave 50% of each Amazon land parcel untouched is erratically enforced.

Other environmental problems in Brazil include water pollution and land damage. Rivers near urban industrial centers are polluted by mercury, toxic industrial wastes, and untreated waste. Brazil lacks fertile soil for agriculture, and the existing soils are threatened by erosion from the clearing of the forests.

Federal agencies with environmental responsibilities include the National Environment Council of the Ministry of the Interior, the Brazilian Institute of Forest Development, and the Ministry of Planning.

Only 6.7% of Brazil's natural areas were protected in 2003, including seven natural UNSECO World Heritage Sites and eight Ramsar wetland sites.

The damage to the rain forest environment is reflected in the number of endangered species which inhabit the region. Between 1900 and 1950, 60 species of birds and mammals became extinct. According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), the number of threatened species included 74 types of mammals, 120 species of birds, 22 types of reptiles, 24 species of amphibian, 42 species of fish, 21 types of mollusks, 13 other invertebrates, and 381 species of plants. The list of endangered species includes Lutz's coastal frog, the Lear's macaw, the guayaquil great green macaw, the American crocodile, two species of marmoset (buffy-headed and white-eared), three species of tamarin (golden lion, golden-headed lion, and golden-rumped lion), the black saki, the woolly spider monkey, and the maned sloth. At least 13 species have become extinct, including the Glaucous macaw.

POPULATION

The population of Brazil in 2005 was estimated by the United Nations (UN) at 184,184,000, which placed it at number 5 in population among the 193 nations of the world. In 2005, approximately 6% of the population were over 65 years of age, with another 29% of the population under 15 years of age. There were 97 males for every 100 females in the country. According to the UN, the annual population rate of change for 2005–10 was expected to be 1.4%, a rate the government viewed as satisfactory. The projected population for the year 2025 was 228,874,000. The population density was 22 per sq km (56 per sq mi).

The population is concentrated in the Atlantic coastal region, especially in the southeast, with the states of Río de Janeiro, São Paulo, and Minas Gerais containing approximately 41% of the total; the states of Bahia, Río Grande do Sul, Pernambuco, and Ceará have about 23%, and the remaining units about 36%.

The UN estimated that 81% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 1.63%. The capital city, Brasília, had a population of 3,099,000 in that year. Other major metropolitan areas and their estimated populations are: São Paulo, 18,333,000; Río de Janeiro, 11,469,000; Belo Horizonte, 5,304,000; Porto Alegre, 3,795,000; Recife, 3,527,000; Salvador, 3,331,000; Fortaleza, 3,261,000; Curitiba, 2,871,000; Campinas, 2,640,000; Belém 2,097,000; Manaus, 1,673,000; Santos, 1,600,000; Goiânia, 1,878,000; São Luís, 978,824; and São José dos Campos, 949,000. The vast interior of the country is sparsely populated, with the indigenous population somewhat concentrated near the Amazon River Basin.

MIGRATION

Between 1821 and 1945, approximately 5.2 million European immigrants entered Brazil, most of them settling in the south. Brazil has the largest expatriate Japanese colony in the world, numbering more than one million. In recent years, because of the increasing prosperity of Europe and Japan, there has been less desire to migrate to underdeveloped rural Brazil or its inflation-harassed industrial cities. Moreover, immigration is controlled by laws limiting the annual entry of persons of any national group to 2% of the total number of that nationality that had entered in the preceding 50 years. The total number of migrants in 2000 was 546,000. As of 2004, Brazil was hosting some 3,833 refugees, 80% of whom came from Africa. In 2004, 1.5 to 3 million Brazilians were abroad, most in the United States. Remittances in 2004 were estimated at $6 billion, equivalent to earnings from soybean exports. In 2005, the net migration rate was estimated as -0.03 per 1,000 population.

ETHNIC GROUPS

The indigenous inhabitants were Amerindians, chiefly of Tupi-Guaraní stock, and other small groups in the Amazon Basin and the lowlands of the Paraguay and Paraná rivers. The Portuguese settlers had few taboos against race mixture, and centuries of large-scale intermarriage have produced a tolerant and distinctly Brazilian culture. Within the Brazilian nationality are blended the various aboriginal Indian cultures; the Portuguese heritage, with its diverse strains; the traditions of millions of persons of African descent; and European elements resulting from sizable immigration since 1888 from Italy, Spain, Germany, and Poland. The influx of Japanese and some Arabs during the 20th century has contributed to the complex Brazilian melting pot.

According to the 2000 census, 53.7% of Brazil's population are white; 38.5% are mixed white and black; and 6.2% are black. The remainder are comprised of Japanese, Arab, and Amerindian groups.

LANGUAGES

The official language of Brazil is Portuguese, which is spoken by virtually all inhabitants except some isolated Indian groups. Substantial variations in pronunciation and word meaning, however, distinguish it from the language as it is spoken in Portugal. Spanish is also spoken. A large percentage of the educated have learned either French or English. German, Italian, and Japanese are used in immigrant communities.

RELIGIONS

The 2000 census indicated that about 74% of the population were affiliated with the Roman Catholic church. Protestants constituted roughly 15% of the population, the majority of whom (about 85%) were Pentecostal/Evangelical; Lutherans and Baptists accounted for most of the remaining Protestants. Other denominations included the Assemblies of God, the Christian Congregation of Brazil, the Universal Church of the Kingdom of God, Lutheran, Presbyterian, and Baptist. About 374,000 respondents to the census were members of "oriental religions," which include several branches of Buddhism, Messianism, Seicho No-le, Perfect Liberty, Hare Krishna, Oshoo Disciples, Tenrykyo, Mahicari, Baha'i, Shintoism, and Taoism. There were about 27,239 Muslims, primarily of the Sunni and Shia branches. About 2,905 Brazilians were Hindus. About 7% of the population did not claim any religious affiliation. Muslim leaders estimated that about 3 million citizens were nominally Muslims; however, only about 700,000 were active participants in religious practices. About 100,000 Brazilians are Jewish.

Followers of traditional African and syncretic religions make up about 4% of the populace. Candomble, which focuses on traditional African deities, is a predominant religion among Afro-Brazilians. Xango and Macumba include practices of animism as well as the veneration of Catholic saints and African deities. About 1.3% of the population adhere to a spiritism doctrine known as Kardecism, which was introduced in the 19th century by Allan Kardec of France.

The constitution provides for freedom of religion and the right is generally respected in practice. There is no official state religion; however, the government of Brazil maintains a Concordat with the Vatican. Several Roman Catholic holidays are celebrated as public holidays.

TRANSPORTATION

Roads are the primary carriers of freight and passenger traffic. Brazil's road system totaled 1.98 million km (1.23 million mi) in 2002. The total of paved roads increased from 35,496 km (22,056 mi) in 1967 to 184,140 km (114,425 mi) in 2002. Motor vehicles registered as of 2003 included 16,650,000 passenger cars, and 4,200,000 commercial vehicles. Although the bulk of highway traffic is concentrated in the southern and central regions, important roads have been constructed to link the northeastern and northern areas with the industrialized south. Roads of all types have been built with federal aid, the most important being the network of more than 14,000 km (8,700 mi) of paved roads south of Brasília; aid is also supplied for their maintenance. In September 1970, construction began on the 5,000-km (3,100-mi) Trans-Amazon Highway, possibly the most ambitious overland road project undertaken in this century, linking Brazil's Atlantic coast with the Peruvian border; when completed, a 4,138-km (2,571-mi) north-south section will link Santarém, on the Amazon River, with Cuiabá. The project has had a profound effect on the Amazon Basin, among the world's last great wildernesses. However, a World Bank study in the early 1990s showed that 28% of the country's existing highways were in bad condition, up from only 10% in 1979. Lack of proper road maintenance possibly adds 10–15% to total transportation costs in Brazil. As of 2002, the government had privatized or turned over to the states most of the federal highway system.

Brazil's railway system has been declining since 1945, when emphasis shifted to highway construction. The total extent of railway trackage was 29,412 km (18,294 mi) of broad, standard, and narrow gauge right of way in 2004, as compared with 31,848 km (19,789 mi) in 1970. Of that total, 1.000-m narrow gauge track accounts for the largest portion at 23,915 km (14,875 mi), followed by broad gauge track (1.6 m) at 4,907 km (3,052 mi). Standard gauge track (194 km/121 mi) and a dual broad/narrow gauge track system (396 km/246 mi) make up the remainder. Most of the railway system belongs to the Federal Railroad Corp., with a majority government interest. There are also seven lines that the government privatized in 1997.

Coastal shipping links widely separated parts of the country. Of the 36 deep-water ports, Santos and Río de Janeiro are the most important, followed by Paranaguá, Recife, Vitória, Tubarao, Maceió, and Ilhéus. Bolivia and Paraguay have been given free ports at Santos. Although there are 50,000 km (31,070 mi) of navigable inland waterways, most as of 2004, were remote from the country's population and industry. In 2005, the merchant shipping fleet, which included 150 vessels (1,000 GRT or over), had a total GRT of 2,961,431.

Air transportation is highly developed. In 2003, local and international airlines transported about 32.372 million passengers. In 2004 there were an estimated 4,136 airports, of which 709 had paved runways as of 2005. There were also 417 heliports (as of 2005). Of the 48 principal airports, 21 are international; of these, Río de Janeiro's Galeao international airport and São Paulo's Guarulhos International Airport are by far the most active. The main international airline is Empresa de Viaçao Aérea Río Grandense (VARIG). Other Brazilian airlines are Transbrasil Linhas Aéreas, Cruzeiro do Sul, (associated with VARIG since 1983), and Viaçao Aérea São Paulo (VASP), which handles only domestic traffic and is run by the state of São Paulo. All except VASP are privately owned.

HISTORY

The original inhabitants of Brazil were hunter-gatherers, except in the lower Amazon, where sedentary agriculture developed. There are no reliable population estimates from pre-European times, but probably there were no more than one million.

After the European discovery of the New World, Spain and Portugal became immediate rivals for the vast new lands. Portugal's claim was established by a papal bull of Pope Alexander VI (1493) and by the Treaty of Tordesillas (1494), which awarded to Portugal all territory 370 leagues west of the Cape Verde Islands. On Easter Sunday in 1500, the Portuguese admiral Pedro Álvares Cabral formally claimed the land for the Portuguese crown. Cabral's ship returned to Portugal with a cargo of red dyewood, which had been gathered along the shore, and from the name of the wood, paubrasil, the new land acquired the name Brazil.

In 1532, the first Portuguese colonists arrived, bringing cattle, seed, and the first slaves from Africa. In 1549, the Portuguese governor-general, Tomé da Souza, founded the city of São Salvador, and established the first Portuguese government in the New World. The same year marked the arrival of the missionary Society of Jesus (the Jesuits) to begin their work among the Indians.

Other Europeans began to move in on the Portuguese colony. In 1555, the French established a settlement in the Bay of Río de Janeiro. In 1624, the Dutch attacked Bahia and began to extend throughout northeastern Brazil. Under the Dutch, who remained until ousted in 1654, the area flourished economically. Colonists planted sugarcane, and during the 17th century, the large sugar plantations of northeastern Brazil were the world's major source of sugar.

In 1640, Portugal appointed a viceroy for Brazil, with his seat first in Bahia and after 1763 in Río de Janeiro. The discovery of gold in 1693 and of diamonds about 1720 opened up new lands for colonization in what are now the states of São Paulo, Minas Gerais, Paraná, Goiás, and Mato Grosso. From their base in São Paulo, Brazilian pioneers (Bandeirantes) pushed inland, along with their herds of cattle and pigs, in search of Indian slaves and mineral riches. By the 1790s, when the primitive surface gold and diamond mines were largely exhausted, the Brazilian plateau became thinly populated.

Brazil's first attempt at independence came in 1789 in the mining state of Minas Gerais. A plot, known as the Miners' Conspiracy (Conjuração Mineira) was led by Joaquim José da Silva Xavier, a healer known as Tiradentes ("tooth-puller"). The plot was betrayed and crushed, and Tiradentes was captured and eventually executed, but Tiradentes remains a national hero. In 1807, the invading armies of Napoleon forced the Portuguese royal family and 15,000 Portuguese subjects to flee to Brazil. Río de Janeiro became the seat of the Portuguese royal family until 1821, when King John (João) VI returned home, leaving his son Pedro to rule Brazil as regent. Meanwhile, Portugal's monopolistic trade practices, the suppression of domestic industry, and oppressive taxation had brought about a strong movement for independence, which Pedro supported.

Pedro proclaimed Brazil's independence on 7 September 1822, and later that year was crowned Emperor Pedro I. In 1831, a military revolt forced him to abdicate. The throne passed to his five-year-old son, Pedro. In 1840, Pedro was crowned Emperor. Under Pedro II, Brazil enjoyed half a century of peaceful progress. New frontiers were opened, many immigrants arrived from Europe, railroads were built, and the gathering of rubber in the Amazon Basin stimulated the growth of cities, such as Belém and Manaus. The abolition of slavery in 1888 brought about an economic crisis that disrupted the Brazilian Empire. In 1889, a bloodless revolution deposed Pedro II and established the Republic of the United States of Brazil. A new constitution modeled after the US federal constitution, was promulgated by the Brazilian government in 1891. At first, the republic was ruled by military regimes, but by 1894 constitutional stability was achieved.

Meanwhile, empty areas of good soil were settled in the southern plateau by over 2.5 million Italian, Portuguese, German, Polish, and Levantine immigrants. The rapid spread of coffee cultivation in the state of São Paulo transformed Brazil into the world's largest coffee-producing country. By the end of the 19th century, coffee had become the nation's principal source of wealth. Brazil soon entered a period of economic and political turmoil. Malayan and Indonesian rubber plantations had overwhelmed the Brazilian rubber market, while coffee revenues were reduced by falling world prices of coffee. Regionalism and military rivalries contributed to instability, and by 1930, the nation was in a state of unrest. In that year, a military coup with widespread civilian support placed into power Getúlio Vargas, the governor of Río Grande do Sul.

Vargas' ideology was a blend of populism and corporatism. He sought reforms for Brazil's middle and lower classes, but discouraged dissent and was often repressive. Between 1930 and 1937 Vargas brought a minimum wage and social security to Brazil, but also crushed a leftist uprising in 1935. Vargas formalized his system in 1937, calling it the New State (Estado Novo). For eight years, Vargas attempted to industrialize Brazil, while organizing both workers and their employers into state-run syndicates. Vargas was nationalist in foreign policy, although he encouraged foreign investment. He exploited the US-German rivalry over Latin America to get large amounts of aid until joining the allies in 1942.

Conservative elements of the military, convinced that Vargas was a dangerous force, removed him from office, and promulgated a new constitution in 1946. The "Second Republic" was initiated with the presidency of Eurico Dutra. Vargas was returned to the presidency in the election of 1950 and did not attempt to rejuvenate the New State. He did continue to press for industrialization under state control, establishing a National Development Bank and a state petroleum company. Eventually he ran afoul of the military, which demanded his resignation. He committed suicide in August 1954, a few months before his term of office was due to expire.

He was succeeded from 1955 to 1961 by Juscelino Kubitschek de Oliveira. Kubitschek embarked on an ambitious program of development, spending huge amounts of money and attracting large foreign investments in Brazil. Kubitschek's most ambitious program was the building of a new federal capital, Brasília, in the highlands of central Brazil. Inflation and a burdensome national debt proved to be his undoing, and in January 1961 Jânio da Silva Quadros was inaugurated after a campaign promising an end to corruption and economic stability. The situation proved too difficult for Quadros, and he resigned after only seven months. João Goulart, who had been vice president under both Kubitschek and Quadros, became president only after the conservative Congress combined with the military to reduce his powers and institute an unwieldy form of parliamentary government. In January 1963, in a national plebiscite, Brazil chose to restore presidential powers. But Goulart was caught between pressures from the left, demanding the acceleration of social programs, and the right, increasingly alarmed by trends toward populism.

On 1 April 1964 the military deposed Goulart and arrested 40,000 people, including 80 members of Congress. In the same month, Congress appointed Humberto de Alencar Castelo Branco to the presidency, and in July it approved a constitutional amendment extending Castelo Branco's term of office to March 1967. National elections were postponed, and Brazil entered an era of military supremacy.

In March 1967 Arthur da Costa e Silva, a former army marshal, took office under a new constitution. That constitution was suspended in December 1968, and military hard-liners took the upper hand. Costa e Silva suffered a stroke in September 1969 and died in December. Gen. Emilio Garrastazú Médici, former head of the secret police was chosen to replace him. In March 1974, Gen. Ernesto Geisel, a high official in the Castelo Branco government, became president.

The military governments of the previous 10 years had brought Brazil rapid economic expansion, but there was a dramatic reversal during the oil crisis of 1973–74. Opposition began to mount, encouraged by religious and trade union leaders. President Geisel gradually instituted some degree of political liberalization (abertura ), but the military split on the wisdom of this policy.

During the late 1970s, continuing economic difficulties led to labor unrest and numerous strikes, including a strike of 300,000 metalworkers in metropolitan São Paulo in April and May of 1980 that ended only after troops in tanks and trucks occupied the region. Meanwhile, Gen. João Baptista de Oliveira Figueiredo became president in March 1979. That August, Figueiredo continued Geisel's policy of liberalization by signing a political amnesty law that allowed many political exiles to return home. Also in 1979, censorship of the press and the controlled two-party system were abolished. In November 1982, Brazil had its first democratic elections since 1964. Opposition parties won the governorships of 10 populous states and a majority in the lower house of Congress, but the ruling party remained in control of the upper house and the electoral college, which was to choose the next president. Moreover, the military retained broad powers to intervene in political affairs under national security laws.

The 1985 election was indirect, yet the opposition managed to turn the campaign in 1984 into a reflection of popular choice and capture the presidency. The ruling party chose São Paulo governor Paulo Maluf, who proved unable to distance himself from the unpopularity of the military-controlled regime. The opposition capitalized on the groundswell of hostility and coalesced behind the paternal figure of Tancredo Neves, a senator from Minas Gerais who had held office under Vargas and who campaigned as if the ballot were direct. The election went against the government, and in January 1985, the electoral college duly chose Neves as Brazil's first civilian president in a generation. In March, however, just before his inauguration, Neves fell gravely ill, and he died in April without having been formally sworn in. Brazilians feared another military strike, but Vice President José Sarney was allowed to take office as president. Sarney, who represented a small center-right party allied with Neves's party, consolidated his position after an impressive showing in regional and legislative elections in November 1986.

A new constitution, passed in 1988, was followed by elections a year later. Brazil's first direct presidential elections in 29 years resulted in the victory of Fernando Collor de Mello. Collor received 53% of the vote in the runoff elections. Collor took office in March 1990 and launched an ambitious liberalization program that attempted to stabilize prices and deregulate the economy. Collor was in the process of renegotiating Brazil's huge debt with foreign creditors and the IMF when massive corruption was revealed inside the Collor administration. Allegations implicated Collor himself, who was forced to resign in December 1992. Itamar Franco took over, promising to continue Collor's programs, but long-standing structural problems continued. The nation's chronic inflation was finally brought under control through the Real Plan launched in 1994 by finance minister Fernando Enrique Cardoso (and named for the new currency, linked to the US dollar, which was introduced under the plan).

On the strength of the plan's success, Cardoso, a leading social scientist, was elected to the presidency in October 1994. His policies, which continued to keep inflation under control, reduced tariffs, and included major privatization measures, earned him sufficient support for the passage in January 1997 of a constitutional amendment by the lower house of Congress overturning the nation's ban on consecutive presidential terms and making it possible for Cardoso to seek reelection in 1998. He won reelection in October of 1998 with 53% of the vote in the first round. Worker's Party candidate Luiz Inácio "Lula" da Silva came second with 31.7%. Cardoso also commanded the support of a loose center-right coalition of parties. One of the major challenges tackled by the Cardoso administration was the privatization of the stateowned mining company, Vale de Río Doce, which drew strong opposition from nationalist, leftist, and religious forces. In May 1997 a $3.2 billion controlling stake in the mining and transport conglomerate was sold to private investors. Cardoso's parties also won a majority of the state governor races. Shortly after the election, as a result of the economic crisis, Brazil was forced to devalue its currency, the real. Previously pegged to the US dollar, the real lost more than 60% of its value within days, sending the country into a deeper crisis. Some recovery was observed starting in 1999, but social discontent resulting from high unemployment and growing poverty also flourished. Cardoso was constitutionally prevented from seeking a third consecutive presidential term in 2002.

In the 2002 election, Lula da Silva, the runner-up in the previous two elections and the founder of the Worker's Party, finally succeeded in winning the presidency. After placing first in the first-round election, Lula went on to win more than 61% of the vote to defeat José Serra, Cardoso's candidate, and become the first factory worker ever to be elected president of Brazil. Although many observers feared that Lula would adopt policies detrimental to sound fiscal management and would favor redistribution of wealth over fiscal discipline, during his first months in office Lula demonstrated his ability to be a clever, reliable, trustworthy leader who sought to balance sound macroeconomic policies with an active but responsible commitment to reduce poverty and use government resources to help those most in need. The economy recovered after the 1998 crisis, but poverty and inequality remained widespread and fighting them was Lula's first priority as president. Lula's Zero Hunger plan, aimed at devoting state resources to help the most impoverished Brazilians, received enthusiastic support from political actors and international observers.

In 2004, Brazil—along with Germany, India, and Japan—launched an application for a permanent seat on the United Nations Security Council. Those in favor of expanding the Security Council from its current five permanent members (the United States, Russia, the United Kingdom, France, and China) argued such expansion would remedy the democratic and representative deficit from which the Council suffers. African leaders also wanted permanent African representation in the Council.

During the summer of 2005, corruption allegations plagued the governing Workers' Party (PT). The PT was accused of paying monthly bribes of $12,000 to lawmakers from other parties, and of manipulating the system of appointments to state-run companies. A wave of resignations ensued. President Lula da Silva made a televised apology and claimed he knew nothing about the corruption. His popularity, however, suffered a blow as a result of the corruption scandal.

GOVERNMENT

The Federative Republic of Brazil is a constitutional republic composed of 26 states and the Federal District. This district surrounds the federal capital, Brasília. The constitution of October 1988 established a strong presidential system.

The president and vice president are elected to four-year terms and can be reelected once. In 1985, the previous constitution was amended to allow for direct popular election as opposed to an electoral college system. Between 1964 and 1978, presidents were pre-selected by the military. The president is the head of the armed forces and is in charge of the executive branch, assisted in that task by a cabinet of ministers. He also appoints justices to the Supreme Federal Tribunal, the highest court in Brazil.

The Congress consists of the Senate and the Chamber of Deputies. The Senate has 81 members, 3 for each state plus the Federal District. Senators serve for eight-year terms, with half the members retiring every four years. The 513 deputies are elected for four-year terms by a system of proportional representation in the states, territories, and Federal District. The constitution stipulates that Congress meet every year from 15 March to 15 December. In practice, from 1964 to 1985, the military used the office of the president to dominate the Congress and the state legislatures, suspending them from time to time.

Voting is compulsory between the ages of 18 and 70 and optional for persons over 70, and those between 16 and 18 years of age. Illiterates were permitted to vote in 1985. Military conscripts may not vote.

POLITICAL PARTIES

During the last days of the Brazilian Empire, a group of positivists advocating abolition of the monarchy organized the Republican Party (Partido Republicano—PR) along military lines. After the fall of the empire in 1889, the government was controlled by PR-supported military regimes and opposed locally by the established Conservative and Liberal parties. An opposition group, the Civilian Party (Partido Civilista), organized by Ruy Barbosa, overcame the military regime but was soon absorbed into the Conservative and Liberal groups from Minas Gerais and São Paulo, which instituted a system of alternating the presidency between the two states.

Getúlio Vargas was responsible for the success of three successive parties, one of which survives to this day. In 1930, Vargas formed the Liberal Alliance Movement (Aliança Nacional Liberal—ANL). After Vargas resigned the presidency in 1945 his supporters formed the Social Democratic Party (Partido Social Democrático—PSD). Eurico Dutra, who succeeded Vargas, ran under this party. In 1950, Vargas was elected under the banner of the Brazilian Labor Party (Partido Trabalhista Brasileiro—PTB). Finally, Vargas inspired the National Democratic Union (União Democrática Nacional—UDN) to put up candidates against him. The UDN won the presidency in 1961 for Quadros.

The PSD continued on without Vargas, but formed a coalition with the PTB in 1955. The PSD candidate, Kubitschek, became president, while the PTB's leader, Goulart, became vice president. In the 1958 congressional elections, however, the PTB broke with the PSD. The PTB survives as a small party, having lost many of its members to other laborite parties.

After the military takeover in 1964, parties disappeared. In 1966, the military allowed the formation of two official parties: the Alliance for National Renewal (Aliança Renovadora Nacional—ARENA) and the Brazilian Democratic Movement (Movimento Democrático Brasileiro—MDB). ARENA was created as the ruling party, with the MDB playing the role of "loyal opposition." ARENA began with two-thirds majorities in both houses of Congress and increased its majorities in the elections of 1970, while also maintaining control of nearly all state legislatures. ARENA scored further gains in the 1972 municipal elections. However, beginning in November 1974, the MDB began to score legislative gains. Moreover, in the 1974 election the MDB was able to raise issues of social justice and civil liberties.

In November 1979, in accordance with the government's liberalization policy, Congress passed a law abolishing ARENA and the MDB and permitting the formation of new parties. Over the next decade, a number of groups emerged. The government created the conservative Social Democratic Party (Partido Democrático Social—PDS) to replace ARENA. The Democratic Workers' Party (Partido Democrático Trabalhista—PDT) is headed by Leonel Brizola, a frequent critic of the military regime and leader of a similar party before 1964. The Party of the Brazilian Democratic Movement (Partido de Movimento Democrático Brasileiro—PMDB) is a moderate successor to the MDB. The Brazilian Social Democracy Party (PSDB) was founded in 1988 by former PMDB members, including future president Fernando Enrique Cardoso. The Workers' Party (Partido dos Trabalhadores—PT) is led by Luis Inácio da Silva, also known as "Lula," the popular leader of the metalworkers' union. In 1989, Lula placed second in the presidential race, running under a coalition of laborite parties called the Popular Front. Lula lost the runoff election to Collor, receiving 47% of the vote. He ran again unsuccessfully in 1994 and 1998 before winning the 2002 presidential election. The Brazilian Workers' Party (Partido Trabalnista Brasileiro—PTB) is a populist party with working-class appeal, but is conservative on a variety of economic issues. The PT is currently the party with most legislators in congress and its ability to govern will be tested during Lula's presidential term (2003–07).

In 1985, the Liberal Front Party (PFL) was organized by dissident PDS members. It formed the National Alliance with the PMDB, an alliance that won the 1985 elections. Although the PFL lost the 1989 presidential elections, it soon allied with President Collor, although the scandal of 1992 did little to help its fortunes. In the 2002 election, the PFL placed second, behind the PT; and PFL had 84 deputies in the 513-member Chamber and 19 senators in the 81-member Senate.

The Communists had been banned since 1957, but were allowed to organize after 1985. The Brazilian Communist Party (Partido Comunista Brasileiro), founded in 1922, is now a Euro-Communist party firmly committed to conventional politics. The Communist Party of Brazil (Partido Comunista do Brasil) is a more radical faction, Maoist in its origins but now expressing solidarity with any socialists who resist reforms.

Fernando Henrique Cardoso of the PSDB was elected president in October 1994, in Brazil's second direct presidential election since 1960, winning 53% of the vote to 26% for the PT candidate, Inácio da Silva (known as Lula), his closest rival. In October 1998 Cardoso won reelection in a first-round election with 53.1% of the vote, defeating Lula who came second with 31.7%. In 2002, Lula won in a runoff election with 61% of the vote, but his PT only captured about one out of every five seats in Congress. Through alliances and coalitions with other parties, Lula secured majority control of both chambers, but Brazilian politics is characterized by the lack of discipline, and party allegiance responds more to provincial and local interests than strong central party discipline. Yet, under Lula's leadership, the PT has successfully become a national party and is currently the largest and most important party in the country. Party loyalty by legislators has remained weak as most members of the legislature show more loyalty to their state governors that national party leadership. But the success of the PT helped foster a higher degree of party discipline and cohesiveness. The corruption scandal that rocked the PT in 2005, however, caused the party to lose a significant amount of public trust.

LOCAL GOVERNMENT

Brazil is a highly centralized system, in which local units have very little authority. Each of Brazil's 26 states has its own constitution and popularly elected legislature and governor. The states are divided into about 5,500 municipalities, which are, in turn, divided into districts. Each municipality has its own elected council and mayor. The state and municipal legislative bodies are subordinate to the federal government. Municipal authorities are responsible for the construction and maintenance of roads, the creation and upkeep of public parks and museums, and for the program of primary education. As districts increase in population, they, in turn, become municipalities. The large municipalities are important political units and may rival the state in political power. The largest city in each municipality serves as the capital, and usually the largest city in the largest municipality serves as the state capital. The Federal District government in Brasília is appointed by the president with Senate approval.

In 1960, after Brasília became the new capital, the former Federal District, comprising Río de Janeiro and the 1,165 sq km (450 sq mi) surrounding it, became the state of Guanabara. Eventually this state was amalgamated into the state of Río de Janeiro. From 1979 on, a few previously unincorporated territories became states.

JUDICIAL SYSTEM

The legal system is based on continental European principles. Although the jury system has been used in criminal cases for more than 100 years, there is a general tendency away from the use of juries. The Supreme Federal Court is composed of 11 justices, chosen by the president with Senate approval, who serve until age 70. It has final jurisdiction, especially in cases involving constitutional precepts and the acts of state and local authorities. The Federal Appeals Court deals with cases involving the federal government. Immediately below it are federal courts located in the state capitals and in the Federal District, as well as military and labor courts. Codes of criminal, civil, and commercial law are enacted by Congress, but in order to preserve the jurisdiction of state courts, the federal courts will not accept original jurisdiction solely because a law of Congress is involved. Electoral tribunals deal with registration of political parties, supervision of voting, infractions of electoral laws, and related matters.

Each state and municipality has its own judicial system. Justices of the peace and magistrates deal with commercial and other civil cases of the first instance. Decisions from state or municipal courts may be appealed to the federal courts and on up to the Supreme Federal Court.

There is also a system of specialized courts dealing with police, juveniles, and family matters.

The judiciary is independent from the executive and legislative branches. Judges are appointed for life and may not accept other employment.

Criminal defendants have a right to counsel.

ARMED FORCES

The Brazilian armed forces had 302,909 active personnel, with reserves of 1,340,000 in 2005. The Army had 189,000 personnel, whose equipment included 178 main battle tanks, 286 light tanks, 409 reconnaissance vehicles, 803 armored personnel carriers, and over 1,554 artillery pieces. The Navy had 48,600 personnel, including 14,600 Marines and 1,150 naval aviation personnel. The Navy's major fleet units included 1 aircraft carrier, 14 frigates, 4 corvettes, 50 patrol/coastal vessels, and 6 mine warfare ships. The naval aviation arm had 26 combat capable aircraft that included 23 fighter ground attack aircraft in addition to 26 antisubmarine warfare helicopters. The Air Force had 69,309 active personnel, with 9 combat capable aircraft, consisting of P-3A Orion maritime patrol aircraft. Brazil's paramilitary force was under Army control and consisted of a public security force of more than 385,600 members. Brazil participated in five UN peacekeeping missions in 2005 The defense budget in 2005 totaled $13.08 billion.

INTERNATIONAL COOPERATION

Brazil is a charter member of the UN, having joined on 24 October 1945; it belongs to the ECLAC and several specialized agencies, such as the FAO, IAEA, IFC, ILO, IMF, UNESCO, the World Bank, and WHO. Brazil joined the WTO on 1 January 1995. The country also participates in G-15, G-19, G-24, G-77, the Río Group, the Latin American Economic System, and the Latin American Integration Association. Brazil is also a member of the OAS. In 1991, Brazil together with Argentina, Uruguay, and Paraguay created the Mercosur trade and strategic alliance.

Brazil is an observer of the Nonaligned Movement and a member of the Nuclear Suppliers Group (London Group) and the Agency for the Prohibition of Nuclear Weapons in Latin American and the Caribbean (OPANAL). The nation contributed a battalion of troops to the UNEF in the Gaza area after the Suez crisis of 1956 and also sent troops to the Congo (now Zaire) in the early 1960s. It has also supported UN efforts in Kosovo (est. 1999), Liberia (est. 2003), East Timor (est. 2002), Côte d'Ivoire (est. 2004), and Haiti (est. 2004). Brazil serves on the United Nations Monitoring, Verification, and Inspection Commission, which was originally established in 1999 as the Special Commission for the Elimination of Iraq's Weapons of Mass Destruction. The country is a signatory of the 1947 Río Treaty, an inter-American security agreement.

In environmental cooperation, Brazil is part of the Antarctic Treaty, the Basel Convention, Conventions on Biological Diversity and Whaling, Ramsar, CITES, the London Convention, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.

ECONOMY

The history of the Brazilian economy before World War II was characterized by six principal cycles, each centered on one export particular commodity: brazilwood, livestock, sugar, gold, rubber, and coffee. At the height of each cycle, Brazil led the world in production of that commodity. Even during the postwar era, variations in price and market conditions for coffee largely determined the degree of national prosperity.

Attempts to diversify the economy through rapid industrialization made Brazil one of the two leading industrial nations of South America, but spiraling inflation thwarted many of the economic advances. The rising inflationary trend of the mid-1960s was due mainly to public budgetary deficits resulting from losses incurred by the government-owned railroads and shipping lines and by official subsidy expenses for imports, such as wheat and petroleum. At the same time, wages increased at a higher rate than productivity; expansion of credit to private enterprises also lagged. The pace of further industrial expansion was determined largely by the availability of foreign exchange, derived chiefly from the sale of coffee, to buy the necessary equipment and raw materials, especially wheat and crude oil.

After the period of what some called an economic miracle (1968–73), during which GDP growth averaged more than 11% annually; the economy cooled to an annual growth rate of 6% between 1974 and 1980, mainly because of increased costs of imported oil. Throughout this period, industrial growth rates outstripped those for the economy as a whole, and industrial products claimed an increasingly large share of GDP.

Inflation was so chronic that in the late 1960s, the government instigated monetary correction, whereby fixed payments were indexed to past inflation. Thus, interest rates, pension payments, mortgage payments, and so forth, kept pace with rising prices, but inflation fed on itself. Even as economic growth surged in the mid-1980s, triple-digit inflation persisted. In February 1986, as the projected inflation rate for the year approached 500%, the government imposed a package of sweeping economic reforms, the Cruzado Plan, which created a new currency (the cruzado), eliminated monetary correction, and froze wages and prices. While inflation plunged to near-zero initially, by mid-1987, it had surged beyond 100%, fueled by increased customer spending due to the price freeze. The government then imposed an austerity program and began negotiations with the IMF for a rescheduling of the staggering foreign debt.

The Brazilian economy was hit by a deep recession and record inflation in 1990. The GDP fell by an unprecedented 4%, while inflation hit an all-time high of 2,938%. In March 1990, upon assuming office, President Collor announced sweeping economic reforms designed to stop inflation and integrate Brazil into the developed world economy. In addition, the Collor Plan imposed a price freeze, as well as a freeze on bank deposits, resulting in a precipitated capital flight. Trade barriers were significantly reduced but the attempt to reduce Brazil's large fiscal deficit resulted in the continual resurgence of inflation and a lack of confidence in the government's economic policies.

The Collor government introduced on 31 January 1991 another package, Collor II, attempting to reduce inflation. The package included wage and price controls and eliminated the overnight market. The economy experienced a lackluster recovery with GDP growth of 1.2%. However, the failure to reduce the structural fiscal deficit, inconsistent monetary policy, the unfreezing of prices and wages by the third quarter, and the unfreezing of remaining blocked accounts undermined the efforts to reduce inflation.

Under IMF guidance, monetary policy continued to tighten liquidity in 1992. The failure of the government's stabilization efforts produced a new inflationary spiral with monthly inflation rates in the mid-20% range. High real interest rates combined with the acceleration of inflation and the political uncertainty over the outcome of the impeachment proceedings produced another recession with GDP decline of 1.5% for 1992.

Inflation continued to rage in the early 1990s. In 1994 it peaked at 2,700%. That year, the finance minister, Fernando Henrique Cardoso (later president), introduced a new currency, the real, and a new economic plan called the Real Plan. The plan featured privatization of state-owned industries, lowering of tariffs, and the abolition of Brazil's unique and counterproductive wage-inflation indexing, which had sent prices on a seemingly endless upward spiral. By ending the hyperinflation of the past decades, the government greatly increased the standard of living of millions of Brazilians, allowed businesses to plan for the medium term in an environment of stability, and created a class of economically stable consumers. Inflation had dropped to only 6.9% by 1997, and has since remained in single digits.

From 1988 to 1998, GDP growth averaged 2.4%. The Real Plan had to be abandoned in early 1999, however, as the Brazilian economy became engulfed in the aftermath of the Asian financial crisis of 1997 and the Russian financial crisis of 1998. Brazil lost an estimated $50 billion in foreign reserves in the resulting capital flight. Steps were taken by the Group of Seven and the international financial institutions to try to reassure foreign investors. On 2 December 1998, a two-and-three-quarter-year standby agreement with the IMF went into effect, buttressed by a credit line of about $18.2 billion, as well as a one-year standby under the Supplementary Reserve Facility (SRF) with a $12.6 billion credit line, both part of an international support package totaling $41.5 billion. The support package had been designed as a precaution against Brazil catching the "Asian flu," as it were, but it did not prevent the Brazilian currency crisis of 1999. On 13 January 1999 the Central Bank devalued the real by 8%; on 15 January 1999, the Cardoso government announced that the real would no longer be pegged to the US dollar, ending the Real Plan. Immediately, the real lost more than 30% of its value, and subsequent devaluation made the real lose a total of 45% of its value. Despite the devaluation, the economy showed positive, if weak, growth in both 1998 (0.2%) and 1999 (0.8%), and inflation remained under control, at 3.2% in 1998 and 4.9% in 1999. However, Brazil's debt service ratio soared to an untenable 113.1% of export earnings in 1999, up from 62.7% in 1997 and 76.2% in 1998. To some extent, the problem was self-correcting, as the devalued real made Brazilian exports more competitive, which increased export earnings in 2000, and helped reduce the debt service ratio to 90.8% by 2000 and to 78.5% by 2001. GDP grew 4.5% in 2000, led by exports, while inflation picked up to 7%. Growth then fell to 1.4% in 2001 as the US recession and the global economic slowdown dampened export demand.

At the expiration of the 1998 IMF standby agreement in September 2001, two other one-year standbys were put in place with credit lines totaling about $30 billion. In 2002, debt service payments were running at over 80% of exports (a debt service ratio of 80.3%) as export markets continued slow after the 11 September 2001 terrorist attacks on the United States, and as investors became increasingly anxious about the economic consequences of a victory by Luiz Inácio Lula da Silva in the October presidential election. There were also questions about whether the administration of US president George W. Bush would support another standby arrangement with the IMF for Brazil. On 6 September 2002 the expiring 2001 arrangements were replaced by two more one-year standby arrangements with a $30 billion line of credit just as the currency exchange rate and the Brazilian stock market index—the Bovespa index—were reaching historic lows. Both the exchange rate and the Bovespa index improved after the election and into the first quarter 2003; the improvements were in part because the sell-off had preceded the election and in part because the Lula government was proving less radical than had been feared. Overall, real GDP is estimated to have grown 1.5% in 2002, while inflation increased to 8.4%, up from 6.8% in 2001.

Although hyperinflation in Brazil has ended, and the economy has to a great extent been liberalized, public-solvency indicators deteriorated in the midst of low growth and stalled fiscal reforms in the mid-2000s. President Lula da Silva by 2006 had won market confidence by showing commitment to stability and reform, and improved public-debt ratios, but the tightness of macroeconomic management frustrated industrialists and alienated da Silva's traditional supporters. Brazil uses inflation-targeting as a framework for monetary policy in the context of a floating exchange rate. The central bank has set a target inflation rate of 5.1%, and by 2006, inflation was on the decline. After the trade balance swung back into surplus in 2001 for the first time since 1993, the export to GDP ratio rose further in 2003, to 17.2%, following consecutive years of record export earnings in 2002–03. Primary products performed strongly by 2005, prompted by robust Chinese demand for soya and iron ore, but exports of manufactures also increased, led by automobiles. Underinvestment, particularly in infrastructure, has led to high costs and inefficiencies in services such as transportation, energy provision, and communications. Construction, which accounts for two-thirds of investment, was weak in 2005, partly because of high interest rates. There is also a heavy corporate tax burden. In 2004, the economy grew by 4.9%. Growth was likely to slow to 3% in 2005 before picking up again in 2006. Real GDP growth averaged 2.6% from 2000–04. Inflation averaged 8.7% during that period. Brazil was the world's 14th largest economy in 2004, according to the World Bank.

INCOME

The US Central Intelligence Agency (CIA) reports that in 2005 Brazil's gross domestic product (GDP) was estimated at $1.6 trillion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $8,500. The annual growth rate of GDP was estimated at 2.6%. The average inflation rate in 2005 was 6.8%. It was estimated that agriculture accounted for 10% of GDP, industry 39.4%, and services 50.6%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $2.821 billion or about $16 per capita and accounted for approximately 0.6% of GDP. Foreign aid receipts amounted to $296 million or about $2 per capita and accounted for approximately 0.1% of the gross national income (GNI).

The World Bank reports that in 2003 household consumption in Brazil totaled $291.57 billion or about $1,647 per capita based on a GDP of $505.7 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 3.4%. In 2001 it was estimated that approximately 22% of household consumption was spent on food, 18% on fuel, 15% on health care, and 34% on education. It was estimated that in 1998 about 22.0% of the population had incomes below the poverty line.

LABOR

In 2005, Brazil had an estimated work force of 90.41 million. In 2003, it was estimated that 20% were engaged in agriculture, 66% in services, and 14% in industry. As of 2005, an estimated 9.9% of the workforce was unemployed.

The law provides for union representation of all workers except the military, uniformed police, and firemen. Union financing depends largely on a mandatory tax administered by the government, which applies to nearly all workers and employers. The number of strikes has decreased in recent years, with 1,250 strikes recorded in 1996 compared to 84 in the year 2000. Union organizers, especially in rural areas, continue to be violently harassed and even killed. About 16% of Brazil's workforce is unionized. However, most workers in the informal economy, including those not registered with the Ministry of Labor and Employment (MLE) and those who are self-employed, remain outside of the union structure. Around 50% of the country's labor force worked in the informal sector, while the percentage was even higher in the agricultural sector, where 70% were unregistred with the MLE.

Brazilian law limits the workweek to 44 hours, with a weekly rest period of 24 consecutive hours. Excessive compulsory overtime is prohibited with overtime hours at time-and-a-half rate of pay. The minimum wage is adjusted annually. In May 2005, the monthly minimum wage was set at us$130. These laws generally apply to workers in the formal economy.

Children under 16 are generally forbidden to work by law except in certain apprentice programs. However, this law is not effectively enforced. Estimates in 2004 put the number of children laborers between the ages of 5 and 17 who were working at 5.1 million.

Although Brazilian law prohibits compulsory or forced labor, forced, even slave labor, continues to be a problem. According to estimates by the International Labor Organization, there were about 25,000 slave laborers in Brazil, most of whom were in the states of Mato Grosso and Para. In addition, unsafe working conditions are prevalent throughout the country.

AGRICULTURE

In 2003, 15% of Brazil's economically active population worked in agriculture, down from 23.3% in 1990. Total arable and permanent crop area comprises 66.5 million hectares (165 million acres). Although agriculture's share of exports has declined relative to industrial goods, the value has continued to increase, so that Brazil in 1977 became the world's second-largest exporter of agricultural products. Except for grain (particularly wheat), of which some 6.3 million tons had to be imported in 2004, Brazil is virtually self-sufficient in food. The growth rates for agriculture as a whole averaged 2.8% during 1980–90, and 3.2% for 1990–2000. By 2003, agricultural production was 13.7% higher than during 1999–2001. In 2003, agriculture accounted for 8% of the total GDP. Export crops are significant—in addition to the traditional exports of coffee and cocoa, Brazil is also a major exporter of soybeans and orange juice. In 2004, Brazil ranked sixth in the production of cocoa beans at 169,400 tons, or 4.7% of the world's cocoa bean production. In recent years production has been devastated by the effects of the witches-broom fungus.

The Land Statute Law of 1964 was designed to modify the agrarian structure and increase agricultural output in selected regions over a 20-year period. The law empowered the federal government to expropriate unused or underutilized land by offering indemnification in bonds in the case of large properties and cash payment for smallholdings. In redistributing expropriated lands, priority is given to those who work the land under tenancy, sharecropping, or ordinary labor agreements. Responsibility for implementing the law is divided between the Brazilian Agrarian Reform Institute and the National Institute of Agricultural Development. In October 1984, a law was passed to facilitate the distribution of 43.1 million hectares (106.5 million acres) of state-owned land and nonproductive private estates to 1.4 million peasant families, primarily in the impoverished northeast, through 1989. The formation of cooperatives was encouraged.

Coffee, until 1974 preeminent among export earners, has been declining in importance since the early 1960s, while soybeans, sugarcane, cotton, wheat, and citrus fruits have shown dramatic increases. Brazil led the world in coffee production in 2004, at 2,475,000 tons. Sugarcane production, in which Brazil ranked first in the world in 2004, is grown not only for refined sugar but also as a source of alcohol for fuel, and totaled 410,983,000 tons that year. In 2004, production included 18,256,500 tons of oranges, 24,039,000 tons of cassava, and 211,800 tons of cashews. At 28,500 tons, Brazil was not the world's leading producer of Brazil nuts in 2004—it trails Bolivia. Tobacco production in 2004 totaled 928,338 tons, 14% of world production. Agricultural production in 2004 (in millions of tons) was corn, 41.9; soybeans, 42.9; rice, 13.3; wheat, 6.0; and cottonseed, 2.2. Further agricultural reforms have been carried out under the Carta de Brasília of 1967. The Carta included an incentive program for the construction of storage facilities, to permit farmers to hold products off the market in expectation of better prices. Agricultural research in Brazil is conducted by the Agriculture and Cattle Raising Institute of Research. The expansion of power, transportation, and communications systems during the 1970s further contributed to agricultural development.

ANIMAL HUSBANDRY

Brazil is a leading livestock-producing country, and 197,000,000 hectares (487,000,000 acres—more than one-fifth of the total national area) are devoted to open pasture. Since World War I, cattle production has become one of the country's major sources of wealth. Hereford and polled angus are raised in the southern states of Río Grande do Sul and Santa Catarina, and Dutch and Jersey cattle supply dairy products in the uplands of Minas Gerais, Río de Janeiro, São Paulo, and Paraná. The humped zebu was first introduced in Minas Gerais, where intense crossbreeding produced the Hindu-Brazil breed that is now most common throughout Brazil because it resists tick fever and heat. There were an estimated 192 million head of cattle in 2004, as compared with an annual average of 147.8 million during 1989–91 and 116.6 million during 1979–81.

Hog raising, marked by an improvement in breeds, has doubled since 1935, making Brazil the world's third-largest producer. In 2004 there were an estimated 33 million hogs. Berkshires and Poland Chinas have been introduced in quantity, and, since vegetable oils are increasingly replacing lard, the emphasis is on production of pork, ham, and sausages. Brazil is not a major sheep country, since most of the area is too tropical. The bulk of Brazil's 14.2 million sheep are in Río Grande do Sul. Of the other domestic animals raised commercially in 2004, there were some 9.1 million goats, 5.9 million horses, 1.4 million mules, and some 1.1 billion chickens. Brazil is the world's third-largest exporter of broiler meat.

The government encourages production and seeks more efficient methods of conservation and distribution of meat products. Meat production was 19.1 million tons in 2004, including 7.8 million tons of beef and veal. The dairy industry is most highly developed in the vicinity of large cities. Estimated output of dairy products in 2004 included 23.3 million tons of fresh cow's milk and 1.6 million tons of eggs.

During the years of high inflation, ranchers and farmers looked at their herds and land as assets whose value increased in line with inflation and were less challenged to make investments and increase productivity. With inflation now under control, cattle prices have remained fairly stable, and some meat packers have started turning to the export market.

FISHING

Although Brazil has a seacoast of some 7,400 km (4,600 mi) and excellent fishing grounds off the South Atlantic coast, the nation has never fully utilized its commercial potential. Traditionally, fishing has been carried on by small groups of individual fishermen using primitive techniques and equipment and seldom venturing out of sight of land. Lack of storage facilities, canneries, and adequate methods of distribution have limited the supply and led to the importation of dried fish. Swordfish is caught in large quantities off the coast of Paraíba and Río Grande do Norte, and shrimp is caught and dried along the coasts of Maranhão, Ceará, and Bahia. The fish resources of the Amazon River are not exploited, except for the commercial processing of the pirarucú and an aquatic mammal, the sea cow. The annual fish catch is so modest that there has traditionally been a scarcity during Holy Week, about the only time when Brazilians eat much fish. The total catch in 2003 was 1,086,504 tons, 36% from inland waters. Exports of fish products were valued at $419.1 million in 2003. Small quantities of lobster are exported.

A fisheries development agency was established in the early 1970s to exploit Brazil's coastal potential. The discovery of large quantities of tuna off the coast of Río Grande do Sul has interested foreign fishing companies, and Japanese and US concerns have obtained the right to fish in Brazilian waters and to establish storage and canning facilities. Normally, foreign fishing rights are reserved to the Portuguese. Aquacultural production consists primarily of carp and tilapia.

FORESTRY

Over 50% of South America's forests and woodlands are in Brazil, with an estimated 412 million hectares (1,018 million acres). Sylvan areas in Brazil are nearly three-quarters as large as the forests of all African nations combined. Brazil's forests cover 49% of the country's land area and are among the richest in the world, yielding timber, oil-bearing fruits, gums, resins, waxes, essential oils, cellulose, fibers, nuts, maté, and other products. The Amazon region contains almost 80% of the national forest resources. In the rain forest, as many as 3,000 different species per sq mi (2.6 sq km) may coexist. However, only a limited percentage of forestland is being exploited, in part because of a lack of adequate transportation. Commercial tropical hardwood forests covered 238,000 hectares (588,000 acres) in 2005, or about 58% of the forested area. Brazil accounts for 20% of the world's tropical hardwood resources and is one of the leading producers of tropical hardwood products. Brazilian timber is of fine quality, ranging from wood as light as cork to the wood of the Brazilian pepper tree, with a density one and one-half times that of water. By 1991, rapid deforestation during the previous 30 years in the Amazon (from migration, road building, mining, and tax incentives) had caused the rain forest to shrink by an estimated 8.5% since colonial times. However, the annual rate of deforestation in the 1990s was 0.4%. Government incentives for reforestation projects ended in 1986. Most reforestation is carried out by private companies. The average annual reforested area in Brazil during 1999–2004 was 150,000 hectares (371,000 acres). The hardwood trees of the Amazon rain forest are of excellent quality, but because of a thriving domestic furniture industry, they are used mainly locally; furniture manufacturing is responsible for 40% of the wood consumption in Brazil. The Paraná pine (Araucaria angustifolia) is in greatest demand. It grows in the southern states in stands that comprise about 420 million trees. A Brazilian ban on log exports has focused exports on value-added products (mostly lumber, plywood, hardboard, and veneers). Policies to develop forest resources have changed recently, and the utilization of native species has become very restricted, mainly in the southern region. In July 2004 the government lifted the prohibition on exports of mahogany and other Amazon species such as virola and imbuia, but these exports are under rigid control.

Production of roundwood in 2003 was estimated at 238.5 million cu m (8.4 billion cu ft). Production of paper and woodpulp has expanded considerably since 1975; exports of paper intensified between 1981 and 2000, from 337,000 tons to 1,815,000 tons. Production amounts in 2004 included 31.8 million cu m (11.2 billion cu ft) of tropical hardwood logs and 8.4 million cu m (20.6 million cu ft) of softwood lumber. The total value of Brazilian forest product exports in 2003 reached $2.7 billion, with the United States, Belgium, and China as the primary markets. The Amazon region accounted for 40% of the total Brazilian exports of wood products, while the rest of Brazil accounted for 60% (of which Paraná represented 20%). Exports of plywood in 2003 totaled 1.3 million cu m (3.2 million cu ft), with 47% going to the European Union, 39% for the United States, 4% for the Dominican Republic, and 10% going to other markets.

Brazil's production of rubber in 2004 was 55,000 tons; the natural rubber industry, once a world leader, was dealt a strong blow by the development of cheaper synthetics. Forest products like rubber, Brazil nuts, cashews, waxes, and fibers now come from plantations and no longer from wild forest trees as in earlier days. Maté, derived from a species of South American holly, is steeped to make a popular form of tea. Production totaled 560,000 tons in 2004.

MINING

Brazil was Latin America's leading producer of iron ore, manganese, aluminum, cement, ferroalloys (ranking third in the world), tin (fourth in the world), gold (sixth in the world), and steel (eighth in the world), and produced 92.4% of the world's columbium, whose deposits contained 90% of the world's pyrochlore reserves. Brazil continued to be one of the world's largest gemstones producers and exporters, and the only source of imperial topaz and Paraiacuteba tourmaline. Iron ore was Brazil's second-leading export commodity in 2002, and production of cement, iron ore, tin, and steel were among its top eight industries. Brazil's 19,500 million tons of iron ore reserves ranked it sixth in the world, and recent discoveries of platinum indicated that Brazil could have half the world's reserves. Brazil produced 72 mineral commodities—22 metal, 46 industrial, and 4 fuel—including large deposits of the metals alumina, bauxite, beryllium, chromium, columbium (niobium), copper, lead, nickel, silver, tantalum, thorium, titanium, zinc, and zirconium; of the industrial minerals anhydrite, asbestos, bentonite, diamond, dolomite, fluorite, fluorspar, graphite, gypsum, kaolin (4,000 million tons of reserves, 28.2% of world total), limestone, magnesite (630 million tons of resources with 180 million tons of magnesium content identified), marble, mica, phosphate rock, potash, potassium, prophyllite, quartz (crude, common, crystal, and powder, reserves of 53 million tons), marine salt, rock salt, and talc; and of the fuel mineral coal. In 2000, Brazil also produced sizable quantities of cobalt, tungsten, barite, basalt, calcite, hydraulic cement, diatomite, feldspar, gneiss, granite, kyanite, lime, lithium, nitrogen, mineral pigments, quartzite, industrial sand, calcareous shells, silica, slate, caustic soda, soda ash, sulfur (Frasch and pyrites), and vermiculite.

Brazil's economy was the world's eighth-largest and the largest in Latin America, making up one-third of the region's economy. However, GDP fell in 2003 by 0.2% versus growth of 1.5% in 2002. The mineral-based industries accounted for $38 billion or 8.4% of Brazil's GDP in 2003. Mineral production, including gas and crude oil, came to nearly $13 billion, or around 2.8% of GDP. In 2003, Brazil's workforce was almost 80 million, of this total, about 5% or 960,000 were employed by the minerals sector, not including nearly 650,000 active garimpeiros (independent miners).

Gross iron ore and concentrate output for 2003 was 234,478,000 tons. Eight firms accounted for 96% of iron ore production, with CVRD accounting for 48%. The second-largest producer, Mineraccedilotildees Brasileiras Reunidas S/A (MBR), opened three new mines, Capatildeo Xavier, Tamanduacutea, and Capitatildeo do Mato, in Minas Gerais, to increase capacity to 32 million tons per year by 2004 and to offset depletion at the Aguas Claras and Matuca mines.

In 2003, an estimated 2.5 million metric tons in gross weight of marketable manganese ore and concentrate were mined. Brazil's output of mined tin in 2003 was estimated at 12,000 metric tons.

Major deposits of high-quality bauxite have been discovered in the Amazon region. As a result, output has risen rapidly, from 6.5 million metric tons in 1987, to 13,147,900 metric tons in 2003.

Brazil in 2003 produced 41,300 metric tons of pyrochlore in concentrates, 24,875 tons of columbium in alloys, and 5,064 tons of columbium in oxides from two open pits—Araxa; (Minas Gerais) and Cataleo and Ouvidor (Goias). The two columbium producers, Mineracao Catalao de Goias Ltda. (MCGL) and Companhia Brasileira de Metalurgia e Mineracao (CBMM), had capacities of 65,000 tons per year pyrochlore and 1.9 million tons per year columbium ore. Tantalum production totaled 249 tons in 2003, and increased world demand was expected to maintain an upward trend.

Diamonds, along with other precious and semiprecious stones, were mined primarily in Minas Gerais, Goias, and Bahia. Other gemstones, found throughout the country, were emerald, aquamarine, amethyst, citrine, chrysoberyl, opal, topaz, agate, tourmaline, ruby, and sapphire. In 2003, total estimated yield was 500,000 carats of gem-quality diamond (up from 100,000 in 1998) and an estimated 600,000 carats of industrial diamond. Fewer garimpeiros and increased environmental restrictions have caused a decline in production. Despite government closure of high-content gem placers and high taxes on domestic sales of jewelry, Brazil had great potential, with its 600 million cu m of sedimentary rocks containing diamond grading between 0.01 and 0.1 carat per cu m (15 million carats), which represented 1.2% of the world's diamond reserve base. Belgium received 95% of the uncut stones.

Gold production was estimated at 39,400 kg in 2003, including 5,000 garimpeiros. Deposits found at Serra Pelada in 1980 raised gold production to 103,000 kg by 1989; production averaged 90,380 kg in 1987–91, and output in 1996 was 60,011. Higher production costs, depletion of shallower deposits, lower world prices, and much higher environmental standards caused the drop-offs. Gold output could increase significantly with the growth of copper production and increased interest by domestic and foreign investors in largely unexplored areas; more than 2000 gold occurrences were known, mostly Precambrian vein deposits and alluvial placers.

The discovery of gold in Minas Gerais (general mines) in 1693 made Brazil the world's leading gold producer; rapid exploitation under the Portuguese colonial system exhausted the mines in less than a century. The dissipation of the nation's gold wealth for the benefit of a foreign power, instilled in Brazilians a protective attitude toward mineral reserves, resulting in government control. The 1988 constitution forbade foreign majority participation in direct mining operations. Lack of capital has long restricted development by domestic firms, and Brazilian mining laws and adverse geographic conditions have discouraged foreign capital. The major portion of the mineral industry was partially or wholly owned by private Brazilian investors, Brazilian corporations, and/or foreign companies, the exceptions being the natural gas and petroleum industries. The structure of the industry continued to change to a privately owned/government-regulated regime. Two 1995 constitutional amendments opened the way for participation of the private sector (domestic and foreign), through privatization, joint ventures, and deregulated investment, in the sectors of coastal and river shipping, mining, natural gas, petroleum, telecommunications, and transportation. By the mid-1990s, investment was on the rise, as a result of aggressive economic policies, the diversity of mineral resources, and the constitutional reform that eliminated restrictions on foreign investment in mining. In 2000, the import tax for minerals was reduced, with varying rates, and the export tax would no longer apply to exported mineral products, nor would the tax on industrialized products apply to mining activities.

ENERGY AND POWER

In 2001 drought created an energy crisis in Brazil, which is strongly dependent on hydroelectric power and also the third-largest consumer of electricity in the Western Hemisphere. As of 2002 the country's per capita energy consumption was equal to that of all other South and Central American countries combined. From June 2001 through March 2002, power was rationed allowing the country to avoid rolling blackouts. Brazil is one of the world's leading producers of hydropower.

Total installed electrical capacity increased from 4.8 million kW in 1960 to 8.5 million kW in 1968 and to 73.4 million kW in 2001. In 2003, installed capacity stood at 82.5 GW. Production for 2000 was 339.5 billion kWh, of which hydropower contributed 89%. By 2003, production increased to 359.2 billion kWh. Consumption of electricity in 2000 was 360.6 billion kWh, which increased to 371.4 billion kWh in 2003. Hydroelectric power accounted for 84% of the nation's electric power in 2003, at 302.9 billion kWh. Construction of the Itaipu Dam on the Paraná River took place between 1975 and 1982; this joint Brazilian-Paraguayan project, the world's largest hydroelectric plant, attained its full capacity of 12.6 million kW in 1986, at a cost of $15 billion. About 70% of Brazil's population is served by Itaipu, which generates about 75 billion kWh per year. Each of Brazil's nine turbines (Paraguay controls the other nine) at Itaipu has a capacity of 700,000 kW, which can be transmitted up to 1,000 km (620 mi) away. Brazil regularly purchases a large portion of Paraguay's half of its Itaipu electricity production. Conventional thermal generation in 2003 accounted for only 7.4% of Brazil's total supply of electricity. Nuclear power is provided by two plants: Angra-1 (630 MW) and Angra-2 (1,350 MW). A decision to complete an unfinished third facility, Angra-3, was promised to have been made before the end of 2005. Angra11, began operations in May 1985. It was followed by Angra-2, which took 23 years and $10 billion to complete and became operational in 2000. As of 2002, it was estimated that five more years would be needed to finish Angra-3 and bring it online. Nuclear generation of electricity accounted for 13.840 billion kWh in 2002, or 4% of production for that year. Estimates of uranium reserves were put at 163,000 tons in 1991, the fifth-largest in the world.

Brazil's proven oil reserves, according to the Oil and Gas Journal, are estimated to total 10.6 billion barrels, as of 1 January 2005, making the country second only in South America to Venezuela in the size of its proven reserves. The government-owned Petróleo Brasileiros (Petrobrás), established in 1953, formerly had a monopoly over the exploration and development of petroleum reserves. The 1988 constitution guaranteed the maintenance of state monopolies in the petroleum and electricity sectors, despite rampant privatization. In 1995, however, Brazil's Congress and Senate approved a constitutional amendment ending the government's oil monopoly, and allowing foreign companies to drill, prospect, import, export, refine, and transport oil. The government was to maintain at least 50% of Petrobrás' voting shares, plus one. In August 2000 the government sold a 29% stake in the company but remained the majority shareholder. Brazil's government hopes to raise large amounts of money and attract foreign investment through the privatization of the oil sector, in order to pay off the national debt.

Foreign participation and investment had been forbidden by Brazilian law. However, in the mid-1970s, exploration was opened to foreign companies through risk contracts, and the petrochemicals industry was opened to foreign participation. The National Petroleum Agency (ANP), created in 1997, is charged with opening up the oil industry to both foreign and domestic private interests. By 2004, estimated production totaled 1.8 million barrels per day. However, at 2.2 million barrels per day, consumption still outstripped production, and oil imports were necessary, mostly from Argentina and Venezuela. As of 2002 Brazil had 13 crude oil refineries.

Estimated production of natural gas in 2003 production was reported at 310 billion cu ft. As of 1 January 2005, proven reserves of natural gas were estimated at 8.8 trillion cu ft. In 1975, the government initiated a program to develop alcohol from sugarcane as an energy source. In the 1980s, 80% of the country's cars and light vehicles were powered by alcohol, although slumping oil prices and persistent financial problems within the alcohol industry prompted the government to freeze production at the 1985 level of 11.1 billion liters (2.9 billion gallons). By 1995, the production of gasoline-powered vehicles had shifted to 95% from the almost entirely alcohol-powered production of 1989. Alcohol still has an important function to maintain diverse sources of fuel for the transportation sector. Most transportation fuel sold in Brazil is a mixture of 22% ethanol and 78% gasoline. As of 1999, Brazil produced 200,000 barrels per day of ethanol.

The absence of good coking coal is a handicap to industrial plans, and Brazil must import coal for its steel industry. As of 2002 it was estimated that coal imports could double within the following ten years. Coal consumption in 2002 was estimated at 22.09 million tons.

INDUSTRY

Major industries include iron and steel production, automobile assembly, petroleum processing, chemicals production, and cement making; technologically based industries have been the most dynamic in recent years, but have not outpaced traditional industries. Peak industrial growth was achieved in 1973, when the manufacturing sector grew by 15.8%; growth rates averaging about 7% were posted during 1978–80, rising to 8.3% in 1985 and 11.3% in 1986. Growth slowed significantly during the 1990s. According to the Brazilian Statistical Institute (IBGE), manufacturing rose an annual average of only 0.7% between 1988 and 1998. Growth in 2002 was particularly pronounced in the construction industry, but by 2005 high interest rates had put a drag on construction. The industrial production rate was estimated at 6% in 2004.

In 1969, 3.7 million metric tons of crude steel were produced; by 1985, this had reached 20.5 million metric tons. In 2004, crude steel production amounted to 32.9 million metric tons, making Brazil the eighth-largest steel producer in the world, just ahead of India. Vast reserves of accessible, high-grade ore, plus rapidly expanding domestic and foreign demand for these products, favor continued expansion of the steel industry. By 2006, China had become a key market for Brazilian steel. The major negative factor is lack of domestic soft coal. Companhia Vale do Río Doce (CVRD) is the world's largest producer of iron ore and pellets and the largest Brazilian mining company, responsible for more than 30% of the iron ore transoceanic market share of Brazil. It is the country's largest investor, responsible for 14% of all Brazilian trade.

Motor vehicle production, Brazil's industrial backbone, experienced a drop of nearly 27% from 1998 to 1999 because of the country's financial difficulties. Production of automobiles went from about 2 million units in 1997, down to 1.6 million units in 1998. In 2001, Brazil produced 1.8 million automobiles, an increase of 7% over 2000. In 2000, the country produced more than 70,000 heavy trucks, an increase of 27% over 1999. In 2005, approximately 2.3 million vehicles were produced in Brazil. Thirty percent of all automobiles produced in Brazil are exported to Mexico. The automobile industry is expanding rapidly with major sources of foreign investment and the construction of new manufacturing plants.

Brazil mines and refines petroleum products. Because of increased domestic refining capacity during the 1970s, imports of petroleum products were less needed, and by 1979, Brazil was a net exporter of petroleum derivatives. Brazil's petrochemical industry emphasizes the production of synthetic rubber. There are also over 500 pharmaceutical laboratories and plants in Brazil, the majority in São Paulo. Over 80% of the industry is foreign-owned. Increased construction demands boosted Brazil's cement production during the 1980s and 1990s. Brazil's electrical equipment industry manufactures computers, television sets, transistor radios, refrigerators, air conditioners, and many other appliances. Brazil has the largest textile industry in South America in terms of installed capacity and output, with nearly half of the spindles and looms in operation on the continent. The manufacture of footwear is an important industry. The Brazilian pulp and paper sector is also large, consisting of more than 220 companies, which together employ approximately 80,000 people in industrial operations, as well as another 57,000 in forestry work and operations. The pulp and paper sector is almost fully privately-owned. The government allowed foreign investment in vital industries since 1995, and supports the sale of any residual parastatal enterprises.

SCIENCE AND TECHNOLOGY

The National Council of Scientific and Technological Development, created in 1951 and headquartered in Brasília, formulates and coordinates Brazil's scientific and technological policies. The Brazilian Academy of Sciences was founded in 1916 is headquartered in Río de Janeiro. In 1996, there were 25 specialized learned societies and 52 research institutes covering virtually every area of scientific and technological endeavor. Among the most important scientific institutions are the Oswaldo Cruz Foundation for biological research in Río de Janeiro and the Butantan Institute in São Paulo, which produces serums for the bites of venomous snakes, a field in which Brazil leads the world. Government expenditures on research and development (R&D) in 2000 amounted to $13.078 billion or 1% of GDP. In that same year, Brazil had 352 researchers and 339 technicians actively engaged in R&D per million people. Government spending in 2002 accounted for 60.2% of R&D expenditures, while business accounted for 38.2% and higher education 1.6%. Brazilian high technology exports in 2002 totaled $6.007 billion, or 19% of the country's manufactured exports.

Brazil entered the space age in 1973, with the launching of the SONDA II rocket as part of a program to determine electron density in the low ionosphere, a question of practical importance for aircraft navigation. Under the government's Amazon development program, Humboldt City, a scientific and technological center, has been established in Mato Grosso. Atomic research is conducted at the Energetics and Nuclear Research Institute of São Paulo; other research reactors are located at Belo Horizonte and Río de Janeiro. The Nuclear Energy Center for Agriculture was established in 1966. A total of us$550 million was allocated to the nuclear energy program under the 1975–79 development plan, but the program languished in the 1980s.

In 1996, Brazil had approximately 100 universities and colleges offering courses in basic and applied science. In 1987–97, science and engineering students accounted for 27% of college and university enrollments.

DOMESTIC TRADE

Río de Janeiro and São Paulo are the principal distribution centers; the largest numbers of importers, sales agents, and distributors are located in these cities, having branch offices in other areas. Other major commercial centers are Recife and Pôrto Alegre, in the northeast and the south; Belém, which serves as a distribution center for the whole Amazon River Valley; and Salvador, which is the main distribution center for Bahia and the neighboring states.

The Brazilian commercial code permits the exercise of trade by all persons who make trade their habitual occupation and register with the appropriate government body. Goods are sold in department stores, in specialty shops, by street vendors, and in supermarkets in the larger cities, but most commercial establishments have fewer than six employees. There are a number of consumer cooperatives that are generally sponsored by ministries, trade unions, and social security institutes. Producer cooperatives are found mostly in agriculture and fishing. The franchising sector by 2006 was booming: franchising accounts for about 25% of the retail revenues. There are some 800 franchise chains and 56,000 franchise units in Brazil, which generate more than 350,000 jobs. Credit is extended to higher-income customers on open accounts and to lower-income groups on installment payment plans. Since 1994, the government has enacted constitutional reforms to remove obstacles for privatization and foreign investment.

Business hours are from 8 or 8:30 am to 5 or 6 pm, Monday through Friday, with a two-hour lunch period from 12 to 2 pm. Banks transact business from 10 am to 4:30 pm, Monday through Friday. Shopping hours are from 9 am to 7 pm, Monday through Friday, and from 9 am to 1 pm on Saturdays. Stores are usually closed on Sundays. Department stores are open from 10 am to 10 pm, Monday through Saturday. In many smaller cities and towns, stores are closed for over an hour at lunchtime.

Since 1947, the advertising sector (in all the various media) has increased its expenditures many times over. Most advertising agencies maintain headquarters in São Paulo; some major agencies have branch offices in other large cities. Advertisements are presented on television and on all radio stations, with the exception of the special broadcasting system of the Ministry of Education. Newspapers, magazines, periodicals, motion pictures, billboards, posters, and electric signs are used for advertising. Mobile advertising units equipped with loudspeaker systems are common in the larger cities.

FOREIGN TRADE

Brazil's long-favorable foreign-trade balance deteriorated substantially between 1958 and 1974 as a result of industrial expansion, which necessitated increased imports of industrial capital goods and petroleum. During 1975/76 and again from 1978 to 1982, the foreign-trade balance was in deficit. Beginning in 1983, Brazil recorded trade surpluses: $5.1 billion in 1983, $11.8 billion in 1984, and $11.3 billion in 1985. This achievement was the result of policies that restricted imports and offered substantial incentives to exporters.

Between 1963 and 1981, exports expanded at an average annual rate of 17%, but they grew by only 9.1% between 1982 and 1985. Coffee has long been Brazil's dominant export, but the proportion

of its export earnings declined from 41.3% in 1968 to 3.2% in 2000. As a result of an ambitious energy development program, Brazil's reliance on imported oil dropped from 70% of its needs in 1980 to 45% in 1985.

The notable accomplishment of former President Fernado Collor de Mello to open the Brazilian market remains the cornerstone of Brazil's economic and trade policies. However, after almost 30 years of import substitution, which initially brought high growth and short-term industrialization in the 1960s–1970s, this policy was finally recognized in the late 1980s as the principal culprit of Brazil's economic woes, particularly high inflation and industrial decline.

By the early 2000s, most of Brazil's nontariff barriers to trade, which for many years were the hallmark of Brazil's restrictive trade regime, were eliminated or drastically reduced. Import duties were reduced from an average of about 50% in the late 1980s to 14.2% and a maximum of 35%. While the overall level and pervasiveness of nontariff barriers have been drastically reduced, some import duties remain high in comparison with other countries. While the depression/inflation problems of the late 1990s reduced purchasing power by about 50% among the working and lower middle classes and further skewed the already highly uneven distribution of income, the Brazilian market remains enormously attractive to US businesses.

Although trade barriers continued to recede with the government of former President Itamar Franco who assumed office in 1992, trade liberalization lost some of its momentum, and there were serious concerns regarding automobile, telecommunications, and information technology sectors. The reforms gained new momentum under the administration of the next president, Cardoso.

In 1995, Brazil joined with Argentina, Paraguay, and Uruguay to form the Mercosur common market, made up of 200 million people worth over $1 trillion. The agreement covered tariffs for over 85% of some 9,000 items with the remaining 15% to be covered by 2003 and complete coverage to be achieved by 2006. Brazil has an almost symbiotic relationship with Argentina, in which the latter supplies natural gas, automobiles, and other products; while the former exports steel, shoes, and paper products.

In 1999, Argentina implemented trade restrictions on certain Brazilian products because prices were ridiculously low from the currency devaluation. Brazil replied by putting its own trade barriers in place. Such measures did not bode well for the Mercosur community. Argentina had been in recession for several years, and the global economic slowdown, which began in 2001 further, worsened Mercosur's situation. In addition, Brazil has had considerable problems with its electrical distribution system, forcing the rationing of electricity and complicating production.

By 2006, Brazil and other members of the G-20 group of developing nations had called the most recent trade concessions from the United States and the European Union insufficient. The group was pressing for deeper cuts in farm subsidies. At the same time, Brazil found itself in a separate trade dispute with the United States, after accusing it of failing to obey a WTO ruling outlawing some of its cotton policies. The United States threatened to remove trade preferences worth more than $2 billion if Brazil insisted on asking the WTO for the right to impose $1 billion in sanctions on American goods.

The most popular export commodities from Brazil are road vehicles, iron, and steel. Brazil also exports footwear and textiles. The country exports a substantial amount of iron ore, soybeans, meat, and coffee. Productivity gains, especially in agriculture, have contributed to a surge in exports. Brazil imports machinery, electrical and transportation equipment, chemical products, and oil.

Brazil's leading markets in 2004 were the United States (21.1% of all exports), Argentina (7.6%), the Netherlands (6.1%), and China (5.6%). Leading suppliers included the United States (18.3% of all imports), Argentina (8.9%), Germany (8.1%), and China (5.9%).

BALANCE OF PAYMENTS

After a decline in the mid-1960s, Brazil's reserve holdings grew spectacularly, reaching $6.5 billion by 1974. The prime reason was a steadily rising inflow of long-term capital investment, coupled

with trade balances that were favorable or only minimally unfavorable. In 1974, however, a decline in the value of coffee exports and a doubling of import costs (partly attributable to increased oil prices) more than offset a further rise in capital investment, resulting in Brazil's first payments deficit in nearly a decade. Between 1976 and 1978, Brazil had a positive balance of payments, but large deficits were registered in 1979 and 1980. A surplus was achieved in 1981, in part because of Brazil's excellent trade showing. The surpluses in 1984 and 1985 were sufficient to pay all interest on the foreign debt.

During the 1970s and early 1980s, Brazil increasingly came to rely on international borrowing to meet its financing needs. The foreign debt grew rapidly after 1974 as the government pressed for continued economic growth without regard for balance of payments pressures generated by the oil shocks of the later 1970s and without increasing domestic savings or improving the tax base. The huge trade surpluses of 1984 and 1985 halted the upward trend. However, the 1986 surge in consumer spending drained reserves to such an extent that by early 1987, the government was forced to suspend payments on $68 billion of the estimated $108 billion debt, the highest of any developing nation. An agreement was reached in April 1991 on 1989–90 arrears. In 1992, Brazil and the advisory committee representing foreign commercial banks agreed to a debt and debt service reduction for $44 billion. Under the Real Plan, the balance of payments dropped from a surplus of $10.5 billion in 1994 to a deficit of $3.1 billion in 1995, -$5.5 billion in 1996, and -$8.4 billion in 1997. This transformation in Brazil's trade position was due to an overvalued exchange rate, market opening, and suppressed demand for capital and consumer goods. A devaluation of the currency in 1999 led to a reduction of the trade deficit in 1999 and in 2000.

The period of high net capital inflows and currency strength came to an end in 2001. Import compression in 2002–03, and an increase in export earnings after 2003, brought about a large adjustment on the current accounts: the trade surplus ballooned from $2.7 billion in 2001 to $33.7 billion in 2004, which transformed the current account from a deficit of 4.6% of GDP in 2001 to a surplus of 1.9% of GDP in 2004. In the first half of 2005, the trade surplus continued to grow.

BANKING AND SECURITIES

A banking reform enacted in December 1964 provided for the establishment of the Central Bank of the Republic of Brazil (changed in 1967 to the Central Bank of Brazil), with powers to regulate the banking system and the stock market. The Central Bank serves as the financial agent of the federal government and functions as a depository for the reserves of private banks. The reform also created the National Monetary Council, which formulates monetary policies for the Central Bank.

The Bank of Brazil primarily finances projects in the agricultural sector. The National Economic and Bank (BNDES) provides long-term financing and administers the privatization program.

There once were about 340 commercial banks in Brazil, with hundreds of branch offices. However, banking reforms reduced that number to 233 in 1998. The largest banks are the federal banks Bank of Brazil, the Federal Savings Bank, and BNDS; private banks Bradesco, Itau, Unibanco, Safra, and Banespa; the Real Bank, and the state bank of Río Grande do Sul, Banrisul. Since January 1994, banks and other financial institutions must publish constant-currency financial statements. The major banks are considered to be sophisticated and competitive, many operating online, and offer a broad range of financial services.

The 1996 rise in international reserves and the fall of the dollar against the real falsely portrayed an improvement in the financial market. In an attempt to calm the financial markets' worries about exchange rate risk, the government began issuing bonds indexed to the exchange rate. The bonds were supposed to be a guarantee that exchange rate policy was not going to change. The Central Bank curbed the expansion of the monetary base, thus controlling inflation, while the volume of money controlled by banks increased with the initial relaxation of credit. This enlarged monetary base, which included the stock of federal bonds and deposits at the Central Bank, rose at a faster rate than nominal GDP. At the end of 1996, the enlarged monetary base was equivalent to 23% of GDP compared with 18% of GDP at the end of 1995. The expansion of monetary aggregates resulted from the rise in public debt through bond financing of the fiscal deficit. The relaxation of credit policy after the end of 1995 caused borrowers to overdraw, resulting in liquidity problems during 1996 and 1997. This presented a precarious situation for the Brazilian economy, especially when the 1998 financial crisis occurred. The Central Bank decided to let the real float in relation to the US dollar, severely depreciating the value of the real by about 45%; and the bonds that were supposed to have guaranteed a fixed exchange rate were also devalued. These issues led to a number of bank mergers and closures in 1999 and 2000. The 2001 collapse of the Argentine economy forced down the value of Brazil's currency, although it has since recovered somewhat. An energy crisis has also caused some trouble in the Brazilian economy, leading to and overall downturn in 2002. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $35.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $149.3 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 17.47%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 21.43%.

Brazil opened its market to foreign portfolio investment in 1991. Brazilian tax laws provide incentives for investment in stocks and bonds. Profit and dividend remittances are subject to a 15% income withholding tax. Up to 24% of individual tax liability may be invested annually in share certificates from authorized financial institutions. Furthermore, individuals may deduct from gross income up to 42% of capital subscription in companies or agencies involved in developing the northeastern or Amazon regions, up to 25% of amounts invested in open capital companies, up to 20% of investments in approved forestation or reforestation projects, up to 13.5% of investments in mutual funds, and up to 4% of savings under the National Housing System. Earnings from all the above investments are also excluded from gross income, up to certain limits. The stock market is a source of financing for all listed companies in Brazil, regardless of ownership. All public issues require the approval of the Securities Commission (CVM). There are nine regional stock exchanges, although over 90% of transactions are carried out in São Paulo and Río de Janeiro. In 2004, there were 357 companies listed on the São Paulo exchange. As of December 2004, the total market capitalization of the São Paulo Stock Exchange was $330.347 billion, up from $234.560 billion in 2003. In 2004 the IBOVESPA Index rose 17.8% from the previous year, ending at 26,196.3.

INSURANCE

Brazil has a low rate of insurance compared to developed countries. 2.3% of its GDP in 2001 was insurance compared to an average of 7% in most developed countries. The operations of insurance companies in Brazil are supervised by the Superintendency of Private Insurance (SUSEPO), the National Private Insurance Council (CNSP), and the Institute of Reinsurance of Brazil (IRB), a company which is 50% owned by the government and 50% by the insurance companies operating in Brazil. The IRB was privatized in the second half of 2000. Motor-vehicle third-party liability, workers' compensation, fire, cargo/truck, and inland marine insurance are compulsory.

With the lifting of restrictions on foreign insurance companies operating in Brazil, several companies made major investments in the market during 1997 and 1998. The United States is the top investor, with 40% of the market. Nearly half of the insurance policies are sold in the city of São Paulo.

The Brazilian insurance market is characterized by two large groups of insurance companies. The top five groups occupied approximately 50% of the insurance market, including Sul America, Bradesco, Itau Porto Seguro, and American International Group (AIG-Unibanco). The balance of the market is shared among approximately 80 additional groups. As of 2003, direct premiums written totaled $14.565 billion, with nonlife premiums accounting for the largest portion at $8.259 billion. Bradesco and Bradesco Vida were Brazil's top nonlife and life insurers with gross nonlife (including healthcare) and gross life premiums written in 2003 of $663.2 million and 1,953.6 million, respectively.

PUBLIC FINANCE

The Brazilian fiscal year coincides with the calendar year. The budget, prepared under the supervision of the Ministry of Planning and Economic Coordination, represents the government's plans for financing administrative operations and capital expenditures. Budgetary deficits increased considerably in the 1960s. The government's objective—to hold total expenditures fairly constant while raising the share of capital outlays—was achieved by an austerity policy. Although the federal budget deficit was reduced in real terms during the late 1960s, fiscal problems continued to be a major source of inflationary pressure, with revenues hovering between 14.5% and 16.5% of GNP and total government expenditures in the range of 17.5–19%. Government revenue increased considerably, and each year the real deficit was reduced below the previous year's level both absolutely and relatively. Public spending was stepped up, particularly transfer payments; transfers of capital to decentralized agencies increased, although direct investment by the central government fell off. Thus, more capital was invested in basic infrastructural projects. Increases in both revenues and expenditures were rapid during the 1970s, but the pattern of decreasing deficits continued. The budgets for 1973 and 1974 actually showed a surplus, although the realized surplus in 1974 fell far short of the budgeted surplus. There was a budget deficit

in 1975, but surpluses were recorded annually during 1976–80. One of the principal causes of Brazil's financial instability in the 1980s was the rate at which public spending exceeded revenues. Following another stabilization program in 1990, a budget surplus of 1.4% of GDP was recorded, but deteriorated to a deficit of 1.7% of GDP by 1992. During the 1990s, the budget remained in deficit by about 4.0% of GDP, but in 1999, the budget recorded a deficit equal to 9.5% of GDP due to the devaluation of the real. This figure had declined to about 4.2% by 2002. Public spending accounts for about one-third of GDP in Brazil.

The US Central Intelligence Agency (CIA) estimated that in 2004 Brazil's central government took in revenues of approximately $140.6 billion and had expenditures of $172.4 billion. Revenues minus expenditures totaled approximately -$31.8 billion. Public debt in 2005 amounted to 50.2% of GDP. Total external debt was $211.4 billion.

The International Monetary Fund (IMF) reported that in 1998, the most recent year for which it had data, central government revenues in millions of reais were 221,604 and expenditures were 245,032. The value of revenues in millions of US dollars was $190,873 and expenditures $211,619, based on a principal exchange rate for 1998 of 1.161 as reported by the IMF. Government outlays by function were as follows: general public services, 28.4%; defense, 3.5%; public order and safety, 3.2%; economic affairs, 4.8%; housing and community amenities, 0.6%; health, 6.2%; recreation, culture, and religion, 0.1%; education, 6.1%; and social protection, 47.3%.

TAXATION

Brazil's tax structure has been modified repeatedly in recent years, and traditional tax evasion has come under strong attack. A series of income tax reforms, during the 1960s and 1970s closed many loopholes and expanded the roster of taxpayers, mainly through wider use of withholding taxes.

The basic income tax rate on corporations and other legal entities in 2005 was 15%, with an added 10% surtax if profits exceed a certain limit. In addition, there is a 9% social contribution tax. Firms may effectively reduce income tax liability by investing part of the tax due in government-approved incentive projects or by purchasing quotas in funds that invest in such projects. Resident companies are taxed on their worldwide income.

Brazil has a progressive personal income tax that rises to 27.5%. Numerous exclusions from ordinary taxable income include profits on sales of shares, profits from certain real estate sales, and interest on stocks and bonds up to certain limits.

A value-added tax is payable on sales and transfers of goods at varying rates in accordance with the nature of the production (generally 10–15%). All corporations are subject to a social contribution tax at rates ranging from 8% for corporations to 18% for financial institutions. Other taxes include a financial operations levy; taxes on the production and distribution of minerals, fuels, and electric power; a real estate transfer tax; and municipal service and urban real estate taxes. There is a social security tax of 2%, and from 10–20% of employee payroll.

CUSTOMS AND DUTIES

Since the late 1980s, the government has reduced import duties incrementally to encourage trade. Tariffs are based on the MERCOSUR common external tariff, known in Brazil as the TEC. The average applied tariff rate was 13.7% in 2000, down from 32% in 1990. There is an industrial products tax (IPI) that usually ranges from 0–15%, but goes up to 365% on cigarettes and alcoholic beverages. There is also an ICMS (merchandise and service circulation) tax on goods moved through Brazil, at 18% in São Paulo, and 12% in other Brazilian states. There is also a Social Security product tax that varies by product but is generally around 10%. All imports and exports are controlled by SECEX, the Foreign Trade Secretariat, with the help of the SISCOMEX computer system.

Certain sectors, including petroleum products and weapons, require departmental or ministerial approval for imports. Importers must pay state and federal value-added taxes at ports, but these may be recovered for goods to be manufactured or sold in Brazil. There are eight free trade zones, including the oldest one in Manaus, and others in Macapa/Santana, Tabatinga, Guajaramirim, Bonfim, Paracaima, Brasileia, and Epitaciolandia. These zones and some energy development projects are exempted from import duties, as long as they export at least 90% of production.

Brazil and its MERCOSUR partners implemented a common external tariff in 1995, which increased by 3% in 1997 to 23%, to cover all tariff items by 2006. However, the 3% increase is being phased out.

FOREIGN INVESTMENT

Brazilian law gives the same protection and guarantees to foreign capital investments that it gives to investments made by Brazilian nationals. Special incentives are offered for investments in mining, fishing, tourism, shipbuilding, and reforestation and for projects undertaken in the northeast and Amazon regions. Brazil's Foreign Capital and Profit Remittance Law of 1962, as amended, regulates the registration of foreign capital and of reinvestment, profit remittance, interest, royalties, and payments for technical assistance, as well as repatriation of foreign capital. There is no limitation on the repatriation of capital; reinvestment of profits is considered an increase of the original capital for the purposes of the law. Prohibitions on remittances for royalty and technical service payments between related parties were removed under the 1992 tax code. The base tax rate on profits and royalty remittances was reduced from 25% to 15%.

In 1995, Brazil amended its constitution to eliminate the distinction between foreign and national capital. Foreign investors have been allowed to trade on the Brazilian stock market since 1991. The petroleum, telecommunications, mining, power generation, and internal transportation sectors were opened up to foreign investment in 1995.

The growth in the attractiveness of Brazil as a recipient of foreign investment is directly attributed to the economic liberalization implemented under finance minister, and later president, Fernando Enrique Cardoso in 1994. He instituted a new currency, reined in the hyperinflation that had plagued the country for decades, and opened up previously closed industries to private ownership. However, although Brazil embarked on the world's largest privatization drive in 1991, by 2002 privatization had virtually stopped. With the exception of the power-generation sector, most of the largest state enterprises have been sold, and thus privatization has died down.

The Cardoso Administration's liberalization provisions saw foreign portfolio investment go from $760 million the year it was enacted to $30 billion in 1997. Foreign direct investment rose from $19 billion in 1997 to $28.9 billion in 1998 and $28.5 billion in 1999, and then to a record $32.8 billion in 2000. Brazil's surplus on its capital account was over $19 billion in 2000, but not quite enough to prevent a balance of payments deficit of $2.3 billion because of a $10.4 billion debt servicing payment on official development assistance (ODA). A plunge in FDI to $22.5 billion in 2001, in the context of the global economic slowdown and worldwide decline in foreign investment after the 11 September 2001 terrorist attacks on the United States, presented the Brazilian government with serious difficulties in making its debt servicing obligations. The gap would have to be filled through a combination of IMF loans, foreign borrowing, and sales in shares of state-owned enterprises (SOEs).

Investment comes mainly from the United States and EU countries. Investment from the Cayman Islands is thought to represent mainly repatriation of Brazilian capital through FDI, but it is also increasingly a conduit for US-based companies. Investment from Spain and Portugal increased in 1998 due to investment in the telecommunications and banking sectors. The stock of FDI in Brazil was $130.7 billion as of December 1998, of which the US share was 30% ($39 billion); Spain, 8.4% ($10.9 billion); and Germany, 8.1% ($10.5 billion). Four US companies—GM, Ford, Texaco, and Exxon—were among Brazil's top ten domestic enterprises. Four of its top ten exporting firms were foreign, all car manufacturers—Fiat, Ford, GM, and Volkswagen—while five of its top ten importers were foreign companies—Fiat, GM, Mercedes-Benz, Ford, and Ericsson Telecommunications.

Since 2001, the trade balance has improved significantly, helping to produce current-account surpluses in 2003 and 2004. This trend enabled Brazil to weather a steep continuing decline in FDI inflows from $22.5 billion in 2001 to $16.6 billion in 2002 and just $10.1 billion in 2003. FDI inflows in 2004 increased to approximately $17 billion. Brazil had undertaken a significant reduction in trade barriers in the early 2000s. In 2004, Brazil's average Normal Trade Relations (NTR) tariff was 10.8%, down from 32% in 1990. However, Brazil has a poorly-structured revenue system marked by heavy tax burdens. The corporate and indirect taxation systems are particularly complex, porous, and unwieldy, but they do not discriminate between foreign and domestic firms.

ECONOMIC DEVELOPMENT

Economic policy since the late 1960s has had three prime objectives: control of inflation, gradual improvement of the welfare of the poorest sector, and a high economic growth rate. Generally, under the stewardship of finance ministers Roberto de Oliveira Campos and, later, Antonio Delfim Netto (who became minister of planning in 1979), Brazilian policy sought to prevent inflation from eroding economic growth by a process of monetary correction—that is, by the legal revaluation of fixed assets, such as real estate, debits in arrears, and the face value of bonds, to reflect inflation. This technique, which requires extensive government control over the economy, was intended to prevent inflation from distorting the relative values of various types of holdings. It was also disastrously inflationary.

The central stress of the 1975–79 development plan was on economic growth. Economic infrastructure (energy, transportation, and communications) received top priority, with a 25% share of the total investment. A special development plan, known as Palomazonia (the Program for Agriculture, Cattle Raising, and Agrominerals for the Amazon), concentrated on expansion of agriculture, forestry, mineral exploitation, and hydroelectric power in the region. The third national plan (1980–85) placed the greatest emphasis on agricultural development, energy, and social policies. Its main aim was improvement of the public welfare through continued economic growth and more equitable income distribution.

The First National Plan of the New Republic (1986–89), sought to maintain high levels of economic growth, introduce a wide range of basic institutional and fiscal reform in the public sector, and reduce poverty significantly. When inflation continued to mount, however, the Cruzado Plan was introduced; it froze wages and prices for a year, and introduced a new unit of currency, the cruzado. While inflation did drop dramatically, the ensuing consumer spending boom, caused by the desire to take advantage of the price freeze, rekindled inflation. By 1987, Brazil had reverted to orthodox austerity and monetary correction in an attempt to bring the economy under control.

In 1994, finance minister (and later president) Fernando Enrique Cardoso implemented the Real Plan, an economic liberalization named for the newly launched currency, the real. The plan called for the abolition of state control of wages and all indexing to inflation, lowering of tariffs and barriers to international investment, and a massive selloff of state-owned enterprises in nearly every sector. The plan was almost immediately successful, and attracted huge amounts of international investment while raising the living standards of million of Brazilians. Unfortunately, the 1997–1998 international financial crisis caused the Central Bank to let the real float, devaluating the currency by 45%. Instead of immediately falling into a recession, the economy reported modest gains in 1999 and 2000. In 2001, however, economic growth slowed, in part due to the raising of interest rates by the Central Bank to counteract inflationary pressures (Brazil's real interest rates remain among the highest in the world). Brazil was also adversely affected by a domestic energy crisis and the 2001 economic crisis in Argentina, and the real depreciated almost 20% that year. Brazil has been the recipient of successive Stand-By Arrangements with the International Monetary Fund (IMF). The controversial election of the left-wing Workers' Party candidate Luiz Inácio Lula da Silva as president in October 2002 brought jitters to international financial markets, but as of 2006, investors had been impressed with the president's tight fiscal and monetary policies.

Brazil is on the path toward a new development strategy, that of export substitution, which, it is hoped, will allow local government to address Brazil's severe problem of unequal income distribution. As of 2006, the government was committed to structural reforms and tight fiscal management to increase economic efficiency and reduce the fiscal debt. It was running a primary fiscal surplus (excluding interest payments) of more than 4% of GDP in 2005; however, government debt remains high, at 51% of GDP in 2004. Brazil uses inflation-targeting as a framework for monetary policy in the context of a floating exchange rate. Progress on reforms in 2006 was slowed by the government's need to negotiate support in a fragmented Congress.

Since the early 1960s, the government has offered special incentives to agricultural and industrial enterprises that further the development of the northeastern and northern regions of the country. The development of these areas is under the supervision of the Development Superintendency of the Northeast, whose activities cover the states of Maranhão, Piauí, Ceará, Río Grande do Norte, Paraíba, Pernambuco, Alagoas, Sergipe, Bahia, the zone of Minas Gerais located within the Drought Polygon, and the territory of Fernando de Noronha. The Superintendency for the Development of Amazonia, the Superintendency for the Development of the West-Central Region, and the Superintendency for the Development of the Southern Region are the other regional development agencies.

SOCIAL DEVELOPMENT

The Organic Social Security Law of Brazil, passed during the Vargas reform years of the 1930s, covered only some four million urban workers by the 1960s, including metallurgical, textile, and other industrial workers and commercial, bank, and store clerks. In 1976, social security laws were consolidated, and in the following year, the National System of Social Security and Welfare was established. Benefits include modest insurance against accidents; old age, invalids', and survivors' pensions; funeral insurance; and medical, dental, and hospital coverage. The system is financed by contributions from the employer, the worker, and the government. In urban areas the retirement age is 65 for men and 60 for women. Assistance programs and unemployment insurance is funded solely by the government. Sickness and maternity benefits are available to almost all workers. A family allowance is provided for low-income workers with one or more children.

Perhaps the most significant social challenge facing Brazil is caring for the millions of children who lack sufficient education, housing, health care, and nutrition. It has been estimated that over one-third of all children live in poverty. Thousands of children live and work on the streets in deplorable conditions; some are homeless, but a greater number have homes they return to at night. Many street children abuse drugs and they are often forced to resort to crime and prostitution to make a living. As a result, many shopkeepers have taken action against street children, and there is a widespread tendency to regard the problem as a security concern rather than a human rights issue.

Sexual and domestic violence is common and often goes unreported. According to a 2004 survey, 23% of women were subjected to domestic violence. The government has implemented women's stations to address crimes against women, with counseling, shelter, hospital treatment, and information on criminal redress. Although a criminal offense, sexual harassment in the workplace remains a problem.

Racial discrimination is pervasive in Brazil. Most Afro-Brazilians work in low paid jobs and live in poor housing. They have fewer opportunities for higher education and professional employment. Indigenous tribes of the Amazon are increasingly being threatened by mining, logging, and ranching, which encroach on their lands.

Serious human rights abuses by the police have been reported, including the beating, torture, and killing of detainees.

HEALTH

A health and welfare program, Prevsaúde, introduced by the government in 1981, was intended to double health services by 1987. In 1993, however, Brazil's national health care system came to an end, chiefly due to extensive fraudulent activity by hospitals, physicians, and state and municipal health secretariats. The new Brazilian Minister of Health planned to implement a new system and supported legislation to increase funds for the public health sector. As of 1998, public health services, complemented by private services, covered 75% of the population. The Ministry of Health has made efforts to encourage the federal district and 26 states to participate in some quality of care projects. Initiatives include certification by the International Standards organizations, consulting services, total quality management, patient satisfaction, and development of new technologies to increase efficiency. Total health care expenditure was estimated at 6.5% of GDP.

Health and sanitary conditions vary widely from region to region. The large cities have competent physicians, generally with advanced training abroad, but there is a dearth of doctors, hospitals, and nurses in most towns in the interior. In 2004, there were approximately 237,000 physicians, 145,000 dentists, and 77,000 nurses in Brazil. As of that year, there were an estimated 1.3 physicians and 3.1 hospital beds per 1,000 people.

In 2000, 87% of the population had access to safe drinking water and 77% had adequate sanitation. As part of a pilot program, Brazil is fortifying sugar with vitamin A and is currently investigating the feasibility of fortifying foods with vitamin A or iron. As of 1999, children one year old and under were immunized as follows: diphtheria, pertussis, and tetanus, 90%; and measles, 99%. Cholera affected many Brazilians. The HIV/AIDS prevalence was 0.70 per 100 adults in 2003. As of 2004, there were approximately 660,000 people living with HIV/AIDS in the country. There were an estimated 15,000 deaths from AIDS in 2003.

The infant mortality rate is high, but it has declined over the last 20 years. In 2005, the infant mortality was 29.61 per 1,000 live births. Many Brazilian women die during childbirth. In 1998, 160 maternal deaths occurred for every 100,000 live births. An estimated 77% of married women between the ages of 15 and 49 years used contraception. The average life expectancy in 2005 was 72 years.

HOUSING

Despite major urban developments, both the housing supply and living conditions in Brazil remain inadequate. Large, sprawling slums are endemic in the large cities, while most rural dwellers live without amenities such as piped water and electricity. In 2000, there were 44,776,740 residences. Roughly 75% of all dwellings were owner occupied. Roughly half of the housing stock was considered to be in semi-adequate condition. Only about 44% of all housing was considered to be adequate. At last estimate, more than 80% of all housing units were detached houses of brick, stone, wood or concrete; less than 10% were apartments; less than 10% were rural dwellings of wood or clay; and less than 5% were semiprivate units called quartes. In 2000, the housing deficit was estimated at 6.6 million houses.

In 1964, the federal government enacted the National Housing Act and suspended rent controls, with the stipulation that rents could be brought in line with private market levels. The law provided for the establishment of the National Housing Bank (Banco Nacional de Habitação, or BNH), whose main purposes are to stimulate savings to finance home construction through lending institutions, to coordinate the activities of both the public and private sectors, and to introduce financial incentives. The BNH can raise funds through bond issues and may also receive deposits from governmental agencies, public cooperatives, and mixed companies.

EDUCATION

Education in colonial times was carried on first by the Jesuits and then by a few royal schools. Brazil's public school system, always weak, was under the Ministry of Justice and Interior until 1930, when the Ministry of Education and Health was created by Vargas. Responsibility for public education, as defined by the 1946 constitution and the 1961 directives and standards for national education, is divided between the federal, state, and municipal governments. Public elementary and secondary instruction is almost exclusively a function of the municipalities and states, while higher education is the responsibility of the federal Ministry of Education. Public education is free at all levels and nonprofit private schools also receive public funding. The federal government has been active, however, on all three levels through the Federal Council of Education, established in 1961 to coordinate the implementation of the 1961 directives and to advise the Ministry of Education.

The 1961 directives required the federal government to contribute at least 12% of its tax revenues to education, and state and municipal governments were required to contribute a minimum of 20% of their tax revenues for this purpose. The first National Plan of Education, formulated in 1962, called for the extension of compulsory elementary education to five and, eventually, six years, and by 1980 eight years of schooling was required. The 1988 Brazilian constitution allocates 25% of state and local tax revenues to education. As of 2003, public expenditure on education was estimated at 4.2% of GDP, or 12% of total government expenditures.

Primary courses last for eight years. The general secondary lasts for three years; however, students may choose to participate in technical or vocational programs at the secondary level, with programs lasting from three to five years. In 2001, about 67% of all eligible children had been enrolled in some types of preschool program. Primary school enrollment in 2003 was estimated at about 97% of age-eligible students. The same year, secondary school enrollment was about 75% of age-eligible students. Most students complete their primary education. The student-to-teacher ratio for primary school was at about 24:1 in 2003. The ratio for secondary school was about 19:1.

There are more than 90 universities, including the Federal University of Río de Janeiro (founded 1920) and the universities of Minas Gerais (1927), São Paulo (1934), Río Grande do Sul (1934), Bahia (1946), Recife (1946), Paraná (1946), and Brasília (1961). The federal government maintains at least one federal university in each state. Entrance to a college or university is through an examination called the "vestibular"; students may either earn a "bacharel" degree or, with an additional year spent in teacher training, obtain a "licenciado" degree. There are at least 902 institutions at the postsecondary level. In 2003, about 21% of the tertiary age population were enrolled in some type of higher education program.

Adult education campaigns have functioned sporadically since 1933, backed by the federal government with some assistance from social, fraternal, Catholic, Protestant, professional, and commercial organizations. Although millions of Brazilians have received literacy training, the adult literacy rate for 2004 were estimated at 88.4%, with a fairly even rate for men and women.

LIBRARIES AND MUSEUMS

Of Brazil's many hundreds of public libraries, the largest municipal library system is that of São Paulo, with over one million volumes. The National Library in Río de Janeiro (founded in 1810) houses 1.4 million bound volumes, more than eight million documents, and many rare manuscripts. Included in the collection are 60,000 volumes brought to Brazil by the Royal Family of Portugal in 1808. Various government ministries maintain separate libraries in Brasília. The largest academic library is the São Paulo University Integrated Library System with three million volumes in 39 libraries, while the Federal University in Río de Janeiro houses one million volumes. The Brazilian Federation of Librarians Associations, Information Scientists and Institutions (FEBAB) was established in 1959.

Brazil has nearly 200 museums. The National Museum (founded in 1818), one of the most important scientific establishments in South America, is especially known for its Brazilian ethnographic collections. Other important museums in Río de Janeiro include the National Museum of Fine Arts, the Museum of Modern Art, the Historical Museum, the Museum of Mineralogy, the Museum of the Bank of Brazil, the Getúlio Vargas Gallery, and the Indian Museum. The most important museums in São Paulo are the Paulista Museum and the São Paulo Museum of Art. Also in São Paulo is the Museum of Japanese Immigration, detailing Japan's impact on the country. The Goeldi Museum in Belém is famous for exhibits covering every aspect of Amazonian life and history and there is a well-known museum of religious art in Vitória.

MEDIA

The principal telegraph network is operated by the Brazilian Postal and Telegraph Administration, in which the government holds part ownership. National trunk routes and international connections are also operated directly by another mixed corporation, the Brazilian Telecommunications Corp. (EMBRATEL), which inaugurated an earth satellite station in 1969 linking the Brazilian network with member countries of INTELSAT. EMBRATEL has rapidly modernized and extended the domestic telecommunications system with the introduction of microwave networks, including long-distance direct dialing, throughout much of the country. In the Amazon region, the company relies on a tropodiffusion system because of the area's large empty spaces. In 2003, there were an estimated 223 mainline telephones for every 1,000 people; about 200,000 people were on a waiting list for telephone service installation. The same year, there were approximately 264 mobile phones in use for every 1,000 people.

Brazil has one of the largest television broadcasting systems in the world. As of 1999, Brazil had 1,365 AM and 296 FM radio stations. There were also 138 television stations. The primary news agencies are Agencia Brasil (state-owned), Agencia Estado (private, in São Paulo), and Agencia Globo (private). In 2003, there were an estimated 433 radios and 369 television sets for every 1,000 people. About 13.4 of every 1,000 were cable subscribers. The same year, there were 74.8 personal computers for every 1,000 people and 82 of every 1,000 people had access to the Internet. There were 2,001 secure Internet servers in the country in 2004.

There are over 100 daily newspapers published in Brazil. The leading dailies in Río de Janeiro, with their political affiliation and 2002 circulation, include Globo (conservative), 350,000; Jornal o Dia (labor), 250,000; and Jornal do Brasil (conservative), 196,000 (in 2004). The sports daily, Jornal dos Sports, had a circulation of 150,000 in 2004. In São Paulo, the leading dailies (with 2004 circulation figures) included Folha de São Paulo (independent) 1.2 million (up from 640,407 in 2002); Estado de São Paulo (conservative) 491,070 (in 2002); Gazeta Mercantil, 106,000; and Noticias Populaires, 100,000. In Belo Horizonte, the independent Estado de Minas had a circulation of 170,000 in 2004, up from 65,000 in 2002. Porto Alegre's Zero Hora had a circulation of 270,000 in 2004, down from 528,000 in 2002. In Recife, the independent Diário de Pernambuco had a 2004 circulation of 90,000, up from 31,000 in 2002.

The largest Brazilian-owned magazine, which competes with the Portuguese-language edition of the Reader's Digest, called Selecões, is the popular illustrated Manchete of Río de Janeiro (1995 circulation 100,000).

Freedom of the press is guaranteed under the constitution of 1967 and no license is required for the publication of books, newspapers, and periodicals. However, under the newspaper code of 19 September 1972, newspapers were forbidden to publish "speculative" articles on politics or unfavorable reports on the economy. The interests of Brazilian journalists are defended by the InterAmerican Press Association and the influential Brazilian Press Association.

ORGANIZATIONS

Owners of large farms and plantations, particularly coffee plantation owners, usually belong to one or more agricultural associations. The largest of the national agricultural organizations is the National Confederation of Agriculture, but, in general, local member groups of the federation, such as the Paraná Coffee Producers' Association, the Association of Coffee Farmers, and the Brazilian Rural Society, are more powerful than the national organization. Agricultural societies are organized for the primary purpose of promoting favorable legislation toward agriculture in the Congress, and they have become important political units over the years. Other agricultural groups include cattlemen's associations, dairymen's associations, and rice growers' and grain producers' organizations, usually organized on a statewide basis. Professional organizations exist for a wide variety of trades, professions, and interests. These are strongest in São Paulo, Minas Gerais, Paraná, Goiás, and Río Grande do Sul. Chambers of commerce function in every state.

The Brazilian Academy of Letters, the Brazilian Academy of Sciences, and the Brazilian Society for the Advancement of Science are among the many cultural and scholarly organizations. The Associacao Medica Braseleira serves as a physicians network as well as a national forum for the promotion of high standards in healthcare and medical research. There are also several organizations involved in specialized medical research for a wide variety of conditions and diseases.

Most international service, social, and fraternal organizations are represented in Brazil. The Rotary International is well organized in the industrial cities of the south and there are Lions clubs and societies of Freemasons. The Catholic Church and the growing number of Protestants maintain various organizations. Catholic Action and the Catholic hierarchy have actively addressed themselves to combating misery and disease, especially in the big-city slums and in the northeast.

Youth organizations include the Boy Scouts of Brazil and the Federation of Girl Guides of Brazil, which are active nationwide. There is a Junior Chamber organization and active chapters of YWCA. There are numerous sports associations, including many that are affiliated with international organizations.

Brazil has chapters of the Red Cross, ActionAid, Habitat for Humanity, HOPE, World Vision, Defense for Children, Amnesty International, and Greenpeace.

TOURISM, TRAVEL, AND RECREATION

Río de Janeiro is one of the leading tourist meccas in South America. Notable sights include Sugar Loaf Mountain, with its cable car; the Corcovado, with its statue of Christ the Redeemer; Copacabana Beach, with its mosaic sidewalks; and the Botanical Gardens. Large numbers of visitors are also drawn to the churches of Bahia; the historic city of Ouro Preto in Minas Gerais; and the colorful Amazon Valley cities of Belém and Manaus. Brazil is also famous for its vibrant celebrations of Carnival, especially in Río de Janeiro; neighborhood samba groups rehearse all year for this occasion. Brazil's African heritage can best be savored at the Carnival in Salvador. Ecotourism attracts growing numbers of visitors to the world's largest rain forest in the North, the Iguacu Falls in the South, and the Mato Grosso wetlands in the Central West region. Football (soccer) is by far the most popular sport. Brazil hosted the World Cup competition in 1950, and Brazilian teams won the championship in 1958, 1962, 1970, 1994, and 2002. The Maracanã soccer stadium in Río de Janeiro seats more than 180,000 spectators. Other favorite recreations include water sports, basketball, tennis, and boxing.

A valid passport and visa are required of all tourists to enter Brazil. All visitors must secure a visa in advance. Yellow fever vaccination certificates are required if a visitor is from an infected area. Malaria prevention is also recommended.

In 2003, a total of 4,090,590 tourists visited Brazil. As of that year, tourism receipts totaled $2.6 billion. There were 212,580 hotel rooms in 2000, with 425,160 beds.

In 2003, the US Department of State estimated the daily cost of staying in Río de Janeiro at $213. Costs in other cities were lower, with Belo Horizonte at $96, Belém at $173, and Campo Grande at $105.

FAMOUS BRAZILIANS

Joaquim José da Silva Xavier, also known as Tiradentes (d.1792), led an unsuccessful uprising in 1789 against Portuguese colonial rule. The patriarch of Brazilian independence was José Bonifacio de Andrada e Silva (1763–1838), a geologist, writer, and statesman. Pedro I (Antonio Pedro de Alcántara Bourbon, 1798–1834), of the Portuguese royal house of Bragança, declared Brazil independent and had himself crowned emperor in 1822; he became King Pedro IV of Portugal in 1826 but gave up the throne to his daughter, Maria da Gloria. His Brazilian-born son, Pedro II (Pedro de Alcántara, 1825–91), emperor from 1840 to 1889, consolidated national unity and won respect as a diplomat, statesman, and patron of the arts and sciences. Other famous Brazilians during the imperial period include the Brazilian national hero, Luís Alves de Lima e Silva, Duque de Caxias (1803–80), a patron of the Brazilian army; and Joaquim Marques Lisboa, Marques de Tamandaré (1807–97), a naval hero, soldier, and statesman. In the field of international politics, Joaquim Nabuco (1849–1910) won distinction as a diplomat, journalist, and champion of the abolition of slavery; José Maria de Silva Paranhos, Barão de Río Branco (1847–1912), was a famous minister of foreign affairs, who represented Brazil at many international conferences; and Ruy Barbosa (1849–1923) was a lawyer, diplomat, statesman, and jurist. A leader of industrial and economic development was Irineu Evangelista de Souza, Barão de Mauá (1813–89). Brazilian aviation pioneer Alberto Santos Dumont (1873–1932) is called the father of flight for his invention of a gasoline-powered airship in 1901. Oswaldo Cruz (1872–1917) founded the Brazilian Public Health Service and helped eradicate yellow fever in Río de Janeiro. Marshal Cândido Rondon (1865–1957), an explorer of Amazonia, organized the Brazilian Indian Bureau. Dr. Vital Brasil (1865–1950) developed São Paulo's snakebite serum institute at Butantã.

Joaquim Maria Machado de Assis (1839–1908), author of Memórias Póstumas de Braz Cubas and other novels and poems, is generally considered the greatest Brazilian literary figure. The poet Euclides da Cunha (1866–1909) wrote Os Sertões (1902), one of the foremost works by a Brazilian. Other literary figures include Antônio Gonçalves Dias (1824–64), a romantic poet who idealized the Brazilian Indian; Castro Alves (1847–71), who influenced the abolition of slavery; and contemporary writers such as Gilberto de Mello Freyre (1900–1987), José Lins do Rego (1900–1959), Erico Verissimo (1905–1975), and Jorge Amado (1912–2001).

Aleijadinho (Antônio Francisco Lisboa, 1739–1814) was an 18th-century church architect and carver of soapstone religious statues in Minas Gerais. Contemporary artists include the painter Emiliano di Cavalcanti (1897–1976); the painter and muralist Cândido Portinari (1903–62), considered the greatest artist Brazil has produced; and the sculptor Bruno Giorgio (b.1905). Lúcio Costa (b.France, 1902–85), regarded as the founder of modern Brazilian architecture, designed the new capital city of Brasília, and Oscar Niemeyer (b.1907) designed most of the government buildings. Robert Burle Marx (1909–94) originated an unusual form of landscaping to complement modern architectural form. Another Brazilian architect of note, Alfonso Eduardo Reidy (b.France, 1909–64), designed the Museum of Modern Art in Río de Janeiro.

The greatest figure in Brazilian music is the composer and educator Heitor Villa-Lobos (1887–1959), who wrote prolifically in many styles and forms. Other musicians include the composers Carlos Gomes (1836–96), Oscar Lorenzo Fernandez (1897–1948), Francisco Mignone (1897–1987), and Camargo Guarnieri (1907–1993); the concert pianist Guiomar Novaës Pinto (1895–1979); the operatic soprano Bidu Sayao (Balduina de Oliveira Sayao, 1902–99); and the folklorist and soprano Elsie Houston (1900–1943). One of the best-known Brazilians is soccer star Edson Arantes do Nascimento (b.1940), better known as Pelé.

Other noted figures are Getúlio Vargas (1883–1954), president-dictator in the period 1930–45, who increased the power of the central government; Francisco de Assis Chateaubriand Bandeira de Melo (1891–1966), a publisher, diplomat, and art collector; Oswaldo Aranha (1894–1960), president of the UN General Assembly during 1947–49; and Marcelino Candau (1911–83), director-general of WHO during 1953–73. Gen. Ernesto Geisel (1907–96) and his presidential successor, Gen. João Baptista de Oliveira Figueiredo (1918–99), guided Brazil through a period of political liberalization. Luis Inácio Lula da Silva (b.1945) was elected president in 2002, the first socialist president to be elected since 1964.

DEPENDENCIES

Brazil has no colonies, but three national territories are contiguous with or incorporated within the national domain. The constitution provides for the creation of a territory from part of an established state, the incorporation of a territory into an established state, or the organization of a territory into a new state if that territory can demonstrate its ability to meet the requirements of statehood.

The territories of Amapá, on the French Guiana border, and Roraima (formerly Río Branco), on the Venezuelan border, became states on 5 October 1988. The Fernando de Noronha island, off the northeastern coast, was annexed to the state of Pernambuco in 1988. Territorial governors are appointed by the president of the republic, and each territory has one representation in the federal Chamber of Deputies. Territories have no representation in the federal Senate. Trindade, Atol das Rocas, Penedos de São Pedro e São Paulo, and the Ilhas Martin Vaz, small islands in the Atlantic, also belong to Brazil.

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