The Prospects of Business in Brazil

Abstract

Y E economic development of Brazil is important in itself as well as because of its impact on the actual and potential relationships of American business. The fate of forty-five million people who live on a territory in excess of that of the United States may profoundly affect the politics and economics of the Western Hemisphere. Beyond this, the United States has a profound interest in the welfare of a country with which it was united in the recent war and which participated in it to the extent of sending an expeditionary force to Europe. There exists in Brazil a very pronounced feeling of friendship for the United States. Brazilians admire the political and economic institutions of North America. With the elimination of Germany from the international economic scene and the decline of European purchasing power and producing capacity during the more immediate postwar period, the stage is set for an expansion and intensification of mutually profitable business relationships between Brazil and the United States. American businessmen are interested in Brazil in their respective roles as suppliers, customers, investors, and creditors. It can be expected that in their dealings they will be inspired by a feeling of responsibility that will respect the special needs and requirements of an industrially not fully developed country. Such consideration is especially called for in the light of the international situation, which in various respects attaches a strategic importance to Brazil's position. Exploitation of the present bargaining position of American business, which has greatly improved compared with pre-war times, must not alienate Brazil, lest the government, in the interest of its foreign policy, assume the functions of the trader or impose controls which are burdensome on legitimate trade. Foreign trade and investments loom large in the economy of Brazil. There is only little domestic mass purchasing power. The lack of it has equipped the demand of the foreign markets with a special force: it is foreign demand that in the past has exercised an extremely powerful influence on the way in which domestic resources were utilized. As incomes are low, capital accumulation, at such rate as it occurred, was stimulated by large foreign investments and loans. Since private domestic capital is generally not available for larger projects, there has been, in the place of as well as in competition with foreign investment, some amount of domestic public investment. As will be seen later, this need not unduly concern actual and prospective foreign investors. In the heavy industry, for example, the existing foreign establishments can well hold their own in the face of new, semipublic organizations which operate under considerably inferior cost conditions. In this and in other respects it is important also to consider recent political changes in Brazil. The growth of public x The author is associate professor of economics at the Catholic University of America. His research work in Brazil took place under the auspices of the Guggenheim Foundation.