Things Have Changed
Things Have Changed
Behind Brazil's Booming Economy: Agriculture, Tech, and Trade
Ready to embark on an enlightening journey exploring the economic evolution of Brazil? Strap in as we navigate through dramatic GDP growth, a thriving digital revolution, and Brazil's robust role in global agriculture and natural resources. This intriguing exploration uncovers the shifting landscape of globalization and how Brazil, as part of the BRICSA coalition, is carving its own path towards becoming a top five economy.
As we traverse through Brazil's economic terrain, we'll cast a spotlight on its burgeoning agricultural exports and reliance on the same. We'll also examine how the Covid-19 pandemic has impacted its economic momentum while highlighting the significance of monetary policy, past inflation hurdles, and the current favorable trends fostering business growth. From there, we segue into Brazil's burgeoning tech space and the potential growth there, underscoring its sustainability initiatives.
Lastly, we broaden our lens to capture the pulsating industries in Latin America, discussing the EU-Mercosur trade pact and its economic implications. We'll touch upon the rising tech companies in Brazil and the immense benefits of regional partnerships within Latin America. Together, we'll dissect the need for sustainable leadership in Brazil and the broader region, and Brazil's role in global economics amidst the challenges of the Covid-19 pandemic. Be prepared for an informative journey that dissects Brazil's economic strategies and its resilience in weathering global economic storms. So, are you ready to explore Brazil's exciting role in globalization and economics? Because we're ready to take you there.
Join us in this enlightening journey of discovery and insight, as we navigate the fascinating economic landscape of Brazil.
In the past few decades it's been like watching the world shrink right in front of us.
News:Once considered key to increasing trade, post-shrink peace and raising the standard of living, globalization is now seeing a pushback.
Jed Tabernero:Globalization has turned our planet into this super connected place where everything's buzzing Borders. They've become kind of blurry Businesses. Oh man, they're popping up all over the globe. In tech, well, it's like the ultimate game changer, making even the most remote spots possible market hotspots. But the winds of change are blowing once again.
News:The issue was raised at Davos, with new data showing world exports and imports are now in retreat for the first time since the Second World War. Partially driving this retreat nationalistic policies and protectionism.
Jed Tabernero:Enter globalization. While it might sound like we're hitting the brakes, it's a bit more complicated than that. Countries are revisiting the whole global trade angle thanks to the volatile past few years we've witnessed From rising trade tensions, evolving geopolitics and supply chain crises driven by COVID.
Jed Tabernero:Yeah, the showdown with Russia. You also have supply chain issues, post-pandemic tensions with China. Everyone's wondering what globalization will look like in the 21st century.
Jed Tabernero:We're moving from that whole worldwide party mode to a chill regional hangout scene.
Shikher Bhandary:This episode of Things of Change Podcast, we dive into Brazil's remarkable economic transformation. Our focus will be on its impressive GDP growth and the rapidly expanding digital revolution, all while acknowledging Brazil's already established global leadership in agriculture and natural resources. So Brazil is crafting a new narrative of prosperity in a world that's undergoing significant change. Get ready for a Samba of Success.
Jed Tabernero:If you had known how important the technology economy was 20 years ago, would you have done things differently? The internet, cell phones, the cloud and data Things have changed. We're here to talk about it, hi.
Shikher Bhandary:I'm Jed. Hi, I'm Shikhar, welcome to Things of Change, your new Economics and Technology Podcast. So, growing up in India, I start many podcasts like this. But the context of how different it is growing up outside of the US, where I feel the sentiment inside the US has always been we are the best, no one's better than us, that kind of USA mentality. And outside of the US, growing up in India at least 20 years back, when it wasn't the India of today, it was always about, hey, we could be the next big thing and nothing has been more like the next big thing, like the BRICS. So that is the BRICS coalition, brics partnership, which is Brazil, russia, india, china and who else?
Jed Tabernero:South Africa.
Shikher Bhandary:South Africa. Yes, yes, yes.
Jed Tabernero:It's really the.
Shikher Bhandary:BRICSA, but anyway the BRICSA yeah.
Shikher Bhandary:And so each country in this coalition has gone different parts, different ways. China is its different beast. China is basically number two in the world, but the other countries Russia has its own thing going. South Africa maybe we'll discuss this later, but specifically with regards to India and Brazil, there's a common theme a country that's got a lot of people. So you have this massive population and you have these huge tailwinds of great natural resources, self-sustaining to a point, previously agricultural countries and now embracing the digital revolution across the world. That's our focus today Brazil, the biggest country in Latin America, and all the incredible things that are happening in that country, which could probably set it on course to be a top five economy in like five, 10 years.
Jed Tabernero:It's an interesting story. You mentioned BRICS, and Brazil is one of those leading economies in this coalition, right in terms of growth. We were taught about BRICS in college, bro. That's so crazy Studying economics in college, and one of the terms that you needed to know was BRICS and why they were being called out as separate coalition. You know Brazil I don't know if you've ever been to a Brazilian steakhouse man, but the meat, the meat, great. I just took my brother there, who's from Europe, and he was really impressed with with the meat that we had at Brazilian steakhouse. But I've known it to be a place of great agriculture from an economics perspective.
Shikher Bhandary:Sure Economics perspective Brazilian steakhouse.
Jed Tabernero:We know they got good meat. It came into my mind again, into my consciousness Brazil, because quite recently a lot of things from the import-export space and global trade changed with these crazy events this year, dude, because a lot of what happened with the Russia-Ukraine war and the recent opening of China has just shed so much light on how much of a powerhouse Brazil can be in global exports of agriculture I mean food, right. Like we had this massive shortage all of a sudden when the Russia-Ukraine war started and there was this vacuum of space left for the global trade for food and a lot of countries stepped up to try to provide that and Brazil was one of those countries who was vital for, like, exporting I think it was soybeans and corn, right. So it was interesting. But these events I mean these events honestly had pushed Brazil to the top of the trade surplus line, right.
Shikher Bhandary:Yeah, pre-covid. I have to mention pre-COVID, like you know, people would be like okay, they're talking about Brazil. Let me go to the Brazilian stock index and see how they have performed. During COVID it was, you know, they saw some deep pains. They were in a recession, and why is? Because they are so reliant on those exports. If China shuts down, china is like 20% of their exports go to China.
Jed Tabernero:Their biggest trading partner.
Shikher Bhandary:Yeah, if China shuts down, they don't have the money coming in. Rightly so. The GDP estimates were so low during COVID. Why we wanted to actually focus on Brazil is a stat that really hit me like a train was the GDP estimate for 2023 for the country of Brazil was 0.7%, so 0.7% growth for the entire year. In the first three months of 2023, their GDP growth was 4%. They grew 4% in the first three months, which shows how important the reopening trade was for Brazil. When the world started reopening, they started producing and exporting those soybeans and beef and all of that good stuff helps tremendously. They're also one of the largest exporters of iron. So all the construction, everything construction and manufacturing requires iron right. So again, huge cog in the global trade wheel.
Jed Tabernero:Yeah, I know Absolutely, and I think, putting that into perspective, it hasn't always been super rosy in Brazil. You know, things haven't been great, as if you've been listening to our show, you'd be very familiar of the trend of inflation that we've been mentioning all over the world In different types of industries. Brazil was not exempt from this. Obviously, they also had a very difficult time with inflation, and so, you know, central banks all over the world came into focus during this time, and what's really cool about Brazil's economy is that monetary policy. They are super strict with that shit. You can see when stuff goes wrong when, like, a central bank ceases to do its job of trying to control inflation, and we've seen that go really bad, especially on the show. But Brazil, actually, I'm pretty impressed with how they've worked with inflation and used monetary policy and very, very strict monetary very aggressive dude.
Jed Tabernero:I didn't know it worked 12% crazy.
Shikher Bhandary:I mean, can you imagine?
Jed Tabernero:Can you imagine 12%, dude? I mean, we would probably trail that at like an eight, nine percent mortgage rate or something Like. That's ridiculous, you know so.
Shikher Bhandary:What are rates in the us Right now? 5.5 above five. Now, yeah, we're hitting 5.5. To double that and add more, that's where the cost of borrowing basically became. So, as you can see, over covet the businesses that you know you need a certain amount of Money flowing in the system for businesses to be able to grow and consumers to be able to spend and stuff. If inflation is hitting you like um again, like a train, and then the rates are hitting you like I don't know meteor, like it has an impact on an economy and Inflation has started to take down, the reason why we are recording this right now is because you know At least some things have changed. We are looking forward, right. Yes, brazil had has had a tough couple of years, but looking forward, it looks promising because, hey, uh, china's reopening, so your exports are increasing. You're making a bit more money as a result. Inflation is coming down.
Jed Tabernero:As a result, rates are coming down, so now businesses potentially have a bit more like breathing room rates are now going down, as you mentioned, and inflation is also going down, so the pressure on the businesses are becoming less. What do you think's happening in the tech space because of this? You know our listeners are tech enthusiasts from all around the globe and we've actually interviewed some founders who are also from brazil Sinai technologies, maria fujihara we had on the show, who talked a lot about the things that we didn't really notice from the tech's perspective of happening in brazil, for example, like there are a lot of sustainability programs there you know, very Large presence in the sustainability world.
Jed Tabernero:She mentioned that a lot of her work in brazil were being Copied kind of across the globe when it comes to sustainability, you know. So it's also a leader in that space. But dude talk about, like what's happening in the tech space right now In brazil.
Shikher Bhandary:I came across this mckinsey study the internet in developed countries. In advanced economies, the internet has accounted for 10% Of the GDP growth over the last 15 years. 10% of 23 trillion. So if you accumulate that, that itself is tech has brought about trillions of wealth creation over the last 15 years.
Jed Tabernero:You realize that both of us work for trillion dollar Companies. Yeah, that's insane, by the way, knowing that it's only 23 trillion, not only, but 23 trillion dollars is the uscd.
Shikher Bhandary:In developing countries like india and brazil, the internet, according to this study, accounted for 11 growth in the last five years five years. So, from 2018, 11% of their GDP growth is just from the internet. And that's what I'm saying. Like you know, I we have this conversation all the time and we'll we'll do an india episode after this. I was in india two or three months back. Every time I'm in india, it feels like a different, like it's leveling up. It feels closer to like certain cities, feel closer to like new york city. Then it does to my my memory of that city when I lived there, you know. So it's one of those things where you're just seeing this like camberian explosion of businesses and activity Thanks to people coming online.
Shikher Bhandary:Online commerce and banking is like unlocking latin america. In 2023, 80 percent of brazil's consumers access finance through their cell phones. Right, and what is the cell phone? Again, it's tech, it's your broadband, it's the wi-fi, it's the connectivity and all of that great stuff. So you're starting to see some big moves, even in the e-commerce space, because, you know, spending through the internet is e-commerce right. In 2018, e-commerce was like 5% of brazil. In 2023, post-covid, it is 11%, doubling every five years.
Jed Tabernero:No, it's big stuff, dude. It's big stuff, and the fact is, like Countries typically focus on certain areas of expertise right, and being dependent on that one area is very it's kind of really risky. So I like seeing this change that they're growing in tech now and they're making deals all over the place with certain voting blocks as well. Other regions and trade is making a lot of this stuff better. A developing country that is starting to build its infrastructure, its institutions are getting more formalized, they're having better relationships with some globalized countries and they're gonna have commerce coming in seeping in. Typically, there's one industry that does really, really well and therefore leadership throws everything they have into building that piece of the economy, and that's kind of what happened with Brazil in its earlier days.
Jed Tabernero:People started realizing that you can trust really good agriculture products from Brazil and all over Latin America and typically they focused on those. And if you imagine, what does Brazil have, bro, crazy.
Jed Tabernero:They're blessed with natural yeah, brazil and state as well but they have to fricking Amazon.
Jed Tabernero:They have the biggest block of the Amazon and that is a natural resource heaven, although a lot of folks have looked down on the fact that deforestation has been going up in that economy for a little bit during Bolsonaro's leadership and subsequent presidents.
Jed Tabernero:That's why, like the recent election of Lula, had kind of changed the view of a lot of folks when looking at Brazil but as a developing economy they were blessed with the natural resources. This trend of kind of all over the place people are moving more towards a really diverse set of industries is because of this. They're starting to realize that when trade slows down for another country, especially in the way that COVID did imagine being the biggest trading partners, china, when China slowed down, what the heck happened, you know, when they closed ports, what would Brazil do? What would they do with their exports? So I think they realized that and leadership was like oh shit, we got to find other ways to grow certain industries, and tech is one of those that have been growing dude Like. One thing I didn't look into until you did the research and you had mentioned it to me was Mercado Libre, huge company. Dude Like who would have thought that was the alternative for Amazon in the region.
Shikher Bhandary:And they are a payment company as well, because you're doing your finance through Mercado Libre right and incredible numbers. Now Consumers are spending a bit more.
Jed Tabernero:A bit yeah.
Shikher Bhandary:Yeah, that is evident. The numbers are wild. Their revenue has jumped 50% year over year. Year over year their net income has five X's. So you can see, okay, this company yes, it got hit by COVID, but they are showing that they're not only reporting these strong metrics, strong numbers, right, but it's a machine. Now they are hiring aggressively to boost its workforce. They've put like these big hiring numbers in different countries, actually in Latin America, because they want to be the Amazon of South America.
Jed Tabernero:Regionally. It's a huge advantage for them to be growing this kind of company. Amazon is quite a huge company and a huge presence in the US. We employ 2.3 million people in the country and that also means for a company such as Mercado Libre, they could do the same for that region of Latin America. So very exciting to see these developments.
Jed Tabernero:Something that comes to my mind when I think about these regional partnerships is when we were looking into this, we learned a little bit about Mercasur, which is also itself a voting block of folks that are also in Latin America that have regional partnerships. I think, tying into our Mexico episodes right before this, a lot of manufacturing is coming to Mexico because Mexico is a regional partner of the US. There's easy trade going on between the two because of NAFTA. Mercasur is one of these agreements where you have trade flowing through these regions and it's a lot easier for them to help each other grow as a region. I think that blocking itself in Mercasur, it has Argentina, brazil, paraguay, uruguay and Bolivia Quite big countries and if you think about it, you can find a lot of raw materials in these countries that make sense to trade in between themselves. We talked about a lot of battery production on this show, and Bolivia has one of the largest salt mines. It's very interesting to see that this regional partnership is happening and they're helping each other out to do trade deals.
Jed Tabernero:The biggest one, I think this year that you guys will have heard of if you're in the IMEA region is the deal with the EU the entire EU to have one of the largest trade deals signed from the EU. It's a lot like we talked about before. Brazil's economy is very agricultural. They would be exporting a lot of their agricultural products. Europe would be exporting a lot of Finnish goods into Brazil, and so that partnership is very, very vital for them because, as we're talking about, economies are starting to diversify their industries and this is one way they could do. It is. Having these partnerships and trade deals across the region Also makes them more stable for stuff like Black Swan events, like COVID. When COVID happened, you couldn't get stuff from China. Well, what if I could get that same natural resource from Paraguay? Maybe they could make it there. Maybe they could make it in.
Jed Tabernero:Uruguay. So that is something that I think is a trend that's happening across these countries that we've been talking about, mexico and Brazil alike, and it's kind of showing us that there will be kind of a different pace to things when it comes to globalization. Now there are still global deals happening, as we can see with Merkocer and the EU, but now there's a lot more focus on regional partners. So, whatever you have a trade deal for Brazil, you're going to have one for Paraguay, you're going to have one for Uruguay, and therefore that gives it access to freely trade in between, with less taxes, and those are the things that stimulate certain economies. And we're going to see a lot of big tech companies come out of Brazil dude, but also the block of Merkocer. We're going to see a lot of tech companies being supported across the regions because we have certain partnerships. That's the reason why people want to get in on Mexico as well, because, as part of NAFTA, there's going to be a lot easier flow of trade in between the countries.
Shikher Bhandary:You said big companies coming out of Brazil. Mercado Libre is 70 billion dude Right, so that's a big company. Now, and now hopefully we start seeing more of these.
Jed Tabernero:That's what I'm saying yeah, 100%, and excited for where things are going today with what we're quoting as globalization, and it's been really interesting seeing these regional partnerships show up as bigger voting blocks in the world, because we're going to have so much more complex supply chains dude, it's going to come out of nowhere, like processing raw materials. I am excited to see that grow bigger in Brazil.
Jed Tabernero:Because now that they have, these partnerships with the EU, I have a feeling that they're going to start moving from raw materials to actually the processors of these raw materials. Therefore, they can export a lot more things, rather than just raw materials, to the rest of the world. I mean, we learned so much, I think, in this episode about Brazil. I didn't know 90% of the things we talked about today until we did the research, and it's super interesting. I only thought of Brazil as that one country that I supported in the World Cup right, because they're always killing, yeah, and the great celebrations. You know the amazing football that comes out of Brazil.
Jed Tabernero:Now I can kind of appreciate it for something else, which is this growing economy and a real mix of different industries that are about to burst right Now, although things aren't perfect in Brazil, of course. Everything else you'll read on the news and a lot of the issues that are coming out as inequality, as many growing nations have. Things are definitely improving for a lot of people and the growth of these industries and the growth of the region puts Latin America kind of in a spotlight right, and hopefully this trend continues. I love what it's doing for tech and I love that leadership has gone into a more sustainable direction. In all of the things we look at in Latin America, we're seeing that there's an insane focus on sustainability, so it's nice to see. It's nice to see all these great developments.
Jed Tabernero:Brazil is definitely part of this globalization trend of which we named this series after right. We'll see a lot of things coming out of Brazil in the next few years and the way they've persevered through the challenging times of COVID and things that are happening around the world. It serves also as a good economic use case for us to look at for how to deal with monetary policy. Thanks for hanging out with us. It was such a cool episode and, as always, stay curious. The information and opinions expressed in this episode are for informational purposes only and are not intended as financial investment or professional advice. Always consult with a qualified professional before making any decisions based on the content provided. Neither the podcast nor its creators are responsible for any actions taken as a result of listening to this episode.
