Industry

Brazil’s industrial development has been brisk during the last two decades. Between 1947 and 1960, when the import substitution industrialization strategy was at its apex, an outstanding rate of expansion was achieved. After 1960, however, the pace of industrial expansion slowed down, largely because the existing economic infrastructure could no longer sustain the same high rate of growth.

From 1964 onwards, the federal authorities undertook a comprehensive program to overcome these obstacles and to provide an economic environment conducive to renewed expansion of the industrial sector, both public and private. In the last 25 years, Brazil has succeeded in diversifying and expanding the production of manufactured goods and consumer durables. Furthermore, it has established technologically sophisticated industries especially in the fields of telecommunications, electronic data processing, aircraft production, biotechnology, and new materials. Four key sectors – steel, auto, petrochemicals, and utilities – have played a decisive role not only in the development of the industrial sector, but in the expansion of the economy as a whole.
Petroleum and Petrochemicals

Until 1953, the production of crude oil in Brazil was only about 2,000 barrels a day, and the domestic refining capacity was just over twice that figure, forcing the country to be heavily ependent on imports. In that year, after long and sometimes difficult debates, Congress enacted legislation establishing the state-owned oil company Petrobrás. Having been granted exclusive rights for oil exploration and production, Petrobrás quickly set about identifying commercially viable oil deposits to become a self-sustaining, large-scale enterprise. Private actors were only allowed to participate in the refining and distribution stages. In 1993, the Petroleum Intelligence Weekly classified Petrobrás among the 20 largest companies in the world. In 1994 the Brazilian oil company produced 8.4 billion barrels, becoming the 10th company with the Largest oil reserves in the world. Petrobrás has developed some of the most advanced deepwater drilling technology. In 1995, Congress passed a constitutional amendment removing protectionist barriers that had given Petrobrás a monopoly. And in 1997, the new Petroleum Act further dismantled Petrobrás’ monopoly by allowing private companies to partner with Petrobrás or work independently. In the early 1990s, and considering only proven reserves, Brazil became self-sufficient, being able to guarantee its supply for a minimum of 17.3 years. In 2002, Brazil held the 15th position in the world ranking for largest proven oil reserves (9.8 billion of barrels per year), the 16th position for biggest production, and the 12th in refining capacity.

Brazil’s petrochemical industry has experienced rapid expansion. In 1972, Brazil became the largest petrochemical-producing nation in Latin America. Brazil has three petrochemical complexes located in the states of Bahia, Rio Grande do Sul and São Paulo, and two more are projected: a second one in the state of São Paulo, and on in the state of Mato Grosso, associated with the Bolivian natural gas pipeline. The main products are plastics, fertilizers and synthetic textiles. In 2002, Brazil produced around 3 million tons per year, which corresponded to 3 percent of the world’s production.

Ethanol

To better balance Brazil’s petroleum consumption with its crude production, intensive research was conduced from the late 1960s through the early 1970s to identify an economically viable alternative to oil as a fuel source. The National Alcohol Program, set up in 1975, began with the production from sugar cane of anhydrous fuel ethanol, which was blended with gasoline at about 11 percent. By 1979, the program was extended to include the production of hydrated alcohol, which was used pure to power new and converted vehicles. The high point was reached in 1986, when 95 percent of the new passenger cars sold was powered by alcohol, and the fleet of alcohol-fueled vehicles totaled 4.5 million. In 2002, the production of ethanol, both anhydrous and hydrated, reached 12.6 million m3, having increased 9.8 percent in relation to 2001. The government increased the proportion of anhydrous alcohol blended with gasoline to 25 percent by then of 2002.

Power Generation

Brazil’s electricity is almost entirely generated by water power even though a considerable proportion of the nation’s hydroelectric potential remains untapped. By the mid-1990’s, Brazil’s output of hydropower was the third largest in the world. Almost 39 percent of the total energy demanded in the country, in 2001, came from renewable resources, while the world average is 14 percent, and if one only considers developed countries this figure does not exceed 6 percent.

In 2002, over 73 percent of the electrical supply in Brazil was provided by the hydropower segment, thermo-power reaching a far 12 percent, and the nuclear segment only 3.6 percent (9.6 percent was imported). Electric energy production by public agents as well as by self-producers in Brazil reached 344.6 TeraWatts/hour (TWh) in 2002, 4.9 percent over previous year. It comprised public hydroelectric generation of 278.7 TWh (+6.1%), public thermoelectric generation of 36.7 TWh (-5.2%) and the generation by self-producers, of 29.3 TWh (+7.9%).

The national power system is composed of two interconnected grids, one for the North and Northwest and the other for the South, Southeast and Central West. In 2002, the Brazilian installed generation capacity was increased by 6.2 GigaWatts (GW) and reached 82.5 GW: 76.8 GW as a public service and 5.65 GW from self-producers.

Motor Vehicles

The renewed dynamism and modernization of the Brazilian automotive industry are broadly attributed to trade liberalization, which began in 1990, the introduction of lower-priced cars in 1993, and the start of the Real Plan in July 1994. In the seven years since 1990, Brazil has moved up from tenth to eighth place in world output, reaching 2 million vehicles in 1997. From 1997 onwards, output decreased registering a low of 1.4 million vehicles in 1999. And although the year 2000 registered an increase of almost 25 percent, this growth rate was not sustained, coming down to 7.4 percent in 2001 and actually registering a decrease of 1.3 percent in 2002. Nevertheless, the industry earned almost US$ 8 billion from exports in 2002, producing more than 1.7 million vehicles. More important is the fact that more than 20 percent of output is for export, and that has been sustained, while imports have been decreasing, and have registered contractions of 49 percent from 1998 to 1999, and 42 percent from 2001 to 2002. In 2002 the most important motor vehicle export destination was Mexico (24.8%), followed by China (13.6%), and then Venezuela and Argentina (each 13.4%). Vehicle imports totaled just over 104,364 units in 2002 and 67 percent of these came from Argentina, with Korea and Japan holding 2nd and 3rd places, providing Brazil with 8.7 and 7.1 percent, respectively, of its imports. Brazil exported 8.5 percent of its total exports to the United States in 2001, and it imported 0.7 percent of its total imports.

Aircraft Industry

In 1899, four years before Wilbur and Orville Wright flew a heavier-than-air machine at Kitty Hawk, North Carolina, Brazilian Alberto Santos Dumont piloted a dirigible that left from the field of the Aero Club of France, circled the Eiffel Tower, and returned to its base in 29.5 minutes. It was a 7 mile (11 km) trip. In 1906, before official witnesses and a large crowd in Paris, Santos Dumont won the Archdeacon Cup Prize when he flew a self-propelled, heavier-than-air machine for 820 feet (250 meters).

Although a Brazilian was one of aviation’s first pioneers, the aircraft industry in Brazil only began in earnest 30 years ago. Today, the success of planes wholly designed and manufactured in Brazil, mainly by Embraer, and exported to countries on every continent, makes Brazil’s aircraft industry one of the largest in the world. Embraer was state founded in 1969 and privatized in 1994. It was Brazil’s largest exporter from 1999 to 2001, and the second largest in 2002. Although in 2004, the company was the 4th largest producer of commercial aircraft, Embraer also produces military and corporate aircraft. The company won significant orders in 2003 from airlines such as US Airways, Jet Blue and Air Canada. Most of Embraer’s planes have been sold to customers in the United States and in Europe. Embraer’s Tucano, a turboprop military trainer, is used by the Brazilian Air Force and in the air forces of twelve other countries, including France and the United Kingdom.

Telecommunications

The Brazilian Telecommunications System, institutionally set up in the 1970s, consisted of a federal holding company, Telebrás, which controls 27 regional operating companies, and one long-distance and international carrier. Opening up the segment to private capital in the 1990’s introduced a dynamic growth without precedents in the country, with the digitalization of telephone networks, the investment on data communication and mobile telephones. Internationally, besides the recent launching of the second generation satellites, the country is an active partner in various international groups, both for the operation of satellites and for the laying of oceanic optic cables to the United States, to Europe and Asia, and to the MERCOSUL countries.

Tourism

With its continental size and biological and scenic diversity, Brazil stands out as one of the richest destinations in the world for nature-related tourism. Tourism is a growing industry in the country, which receives around 3 million foreign visitors per year.