Risk analysis (Brazil) Research Paper Example | Topics and Well Written Essays - 2500 words

Risk analysis (Brazil) - Research Paper Example The official currency is the Real that divides into 100 Centavos. Moreover, the country pursues industrial and agricultural growth and development of its interior. This entails exploiting the extensive natural resources in the country and utilizing the large labor pool. Today, Brazil enjoys the top position as the leading economic power and a regional leader in South America. In addition, the country led in the economic recovery efforts in the region. However, a wide gap in income distribution and crimes remain greatest problems in Brazil. The Wall Street Journal reported on Brazil’s economic growth on for the second quarter of the year 2012. According to the article, Brazil’s Listless Growth Continues, there is a continued slump in the country’s economy despite efforts by the government to salvage it. Government statistics show that there was slowed growth in the second quarter registered at 1.6%, much lower than the projected value. Brazilian government impleme nted tax cuts, record interest rate cuts and campaigned to weaken its currency in order to ignite more economic activities. However, these efforts did not increase the pace and the economy was still sluggish (Fick, Magalhaes and Lyons). The report further indicates that the country registered the fastest growth rate in the world during the global financial crisis in the recent years. As a result, numerous investors considered investing in Brazil due to the development leap. It also geared the hosting of two main global events namely the soccer World Cup in 2014 and 2016 Olympic Games. However, the optimism on the economy is slowly turning into apprehension. As a result, the current climate for multinational investment is marred with uneasiness. The investors appear unsure of the governments’ measures to stimulate the recovery of the domestic markets. Moreover, Brazil’s economy has downshifted to slower growth with the debt crisis and unpredictable recovery efforts. The government predicted an economic growth of 4.5% that gave the investors’ confidence in the markets. This was due to the increase in spending on key infrastructure projects such as ports and river dams. However, the target growth was never achieved; instead, the country recorded a growth of half the forecast rate (Fick, Magalhaes and Lyons). In a bid to stimulate further recovery and growth, the government through the central bank of Brazil has lowered the interest rates by 5% to 7.5%. In addition, there are other announced programs meant to build projects to improve transport and communication to boost growth. Officials in the country blame the world’s slow economic growth for the country’s performance. Furthermore, the administration cites the investor attitude towards emerging market countries as a cause for slowed growth in their economy. However, several present and projected macroeconomic variables affect the recovery and growth of Brazil’s economy (Fick, Magalhaes and Lyons). The country improved its macroeconomic stability through the creation of foreign reserves, and the reduction of debt profile through a shift in debt burden towards the denominated and domestically held instruments. After the 2008 recession period, Brazil was the first emerging market to recover. The GDP growth reached 7.5% in the year 2010. This was registered as the highest growth rate for the past 25 years of the economy. However, the increase in inflation led to a slowed growth in 2011