The Impact of U.S. Companies on Brazil's Economic Development

In the last three years of the 20th century, foreign trade, investment, and financial markets became more open to new rules. This led to a stronger integration of world economies. There were new tools made, as well as new ways of running businesses and controlling politics (Ocampo, 2003). In Latin America, this process started with times of very high inflation, which scared away both domestic and foreign investors and stifled economic growth. After that, controlling inflation became almost an obsession, and because of how fragile the world's financial markets are, governments have had to adopt tight macroeconomic policies that hurt the economy and jobs (Nayyar, 2006). Most Latin American countries switched to market-oriented policies in the early 1990s to deal with hyperinflation, bring in foreign direct investment, and boost economic growth. But these economic reforms weren't carried out well or at the right time, which led to poor economic performance and more problems in improving the social and economic situations in these countries. Most Latin American countries had unstable governments and slow economic progress in the 1980s and 1990s (Solimano & Soto, 2005).

Brazil has one of the largest growing economies that has made big changes to its economy

After years of great economic growth of 8.4 percent per year in the 1970s, the country's growth slowed down and became less stable after the debt crisis in the early 1980s. Brazil did a good job of handling hyperinflation in the 1990s, but its economy stayed weak for a long time. To get the economy back on track, policies that limited money supply, a fixed exchange rate, privatizations, and other major structural changes were used along with financial and economic liberalization. Some of these measures made things harder on the Brazilian job market, which led to more unemployment and illegal work and slowed the growth of real wages (BID, 2003). Several foreign crises, including the Mexican crisis in 1994, the Asian crisis in 1997, and the Russian crisis in 1998, also made Brazil's economy move in a bad way (Galbraith, 2008). At the same time, the U.S. economy grew in ways that seemed to go against each other. The most unstable time for them was in the 1970s, when the two oil price crashes caused hard times economically (Eichengreen, 2004). The United States' Gross Domestic Product (GDP) grew much less quickly than Brazil's (3.7 percent per year) during that decade. In spite of short economic crises like the savings and loan crisis in the early 1990s and the dot-com crisis in 2001 (Caldentey et al., 2009), the U.S. has had steady economic growth since then, hitting 3.3% per year in the 1980s and 3.4% per year in the 1990s. But the developed countries, especially the U.S., were hit hard by the financial crises in the late 2000s. During the worst parts of the subprime crisis, which began in 2007, the main developing countries' economies grew faster than those of the developed ones. Even though Brazil was able to keep its economy growing steadily throughout the 2000s, there are still big fundamental differences between it and developed countries, even after the terrible crisis of 2007 (Restuccia, 2009).

People say that Brazil's lack of development is caused by a lack of schooling and infrastructure

As well as a production system that focuses on activities that require a lot of work and don't produce much. Ferreira et al. (2011) say that total factor production has been going down compared to the U.S. since the early 1980s. Silva and Ferreira (2011) say that this trend is likely because the service industry is becoming less productive. It's also important to note that from the 1970s to the 1990s, the industry had some small productivity growth, but employment grew faster in low-tech parts of the transformation industry (Cruz, Nakabashi, Porcile & Scatolin, 2007) and in parts of the extractive and transformation industry that usually have low productivity growth (Rocha, 2007). For economic growth in Brazil to last in the long term, the economic structure needs to change for the better. This means that productivity needs to go up and more high-quality jobs need to be created. Many studies show a strong connection between changes in GDP and employment, especially in labor-intensive industries (Walterskirchen, 1999). However, labor productivity, which is directly linked to economic growth, is seen as one of the most important ways to reduce poverty and raise living standards (ILO, 2005). Hull (2009), who looked at the productivity of different economic sectors from different countries, came to the same conclusion: sectors with high productivity help reduce poverty more than sectors that require a lot of labor. However, Walterskirchen (1999) says that the level of employment is more affected by sectors with high productivity.

The differences in economic progress over the last few decades between Latin America and the U.S. may be due in large part to differences in labor productivity (Restuccia, 2009). According to Sacconato and Menezes-Filho (2005), productivity was a big reason why income levels in Brazil and the U.S. were different from 1988 to 1995, as well as the differences in wages between high and low productivity industries in Brazil. A lot of research (Feinstein, 2008; Salvatore, 2008; Romanatto et al., 2008, for example) has shown that there is a link between labor productivity and wage. However, only a small part of gains in labor productivity may be turned into gains in real wages. For example, in Brazil before the 1980s, gains in real wages were small (Colistete, 2009).

In Brazil in the 2000s, wages went up and unemployment went down quickly

On a larger scale, this behavior happened during a good international environment that kept the economy stable, improved the current account, and made the foreign debt profile better (ECLAC, 2007). Not only did the dynamics of economic growth cause unemployment to drop and pay to rise, but so did the trend in Brazil's population. Arbache (2011) says that a decrease in the number of people of working age puts pressure on the labor market, which becomes less flexible when there aren't enough workers. If efficiency is low in this situation, high wages could have an unwelcome side effect: they could make production costs go up, which makes firms less competitive in the global market and, in the long run, makes it harder to keep jobs. Overall, the updated research on productivity, the job market, and wages shows that low output and poor quality jobs have been common in the last few decades, even though Brazil's economy and income did better in the 2000s. We will look at how different the structure of the Brazilian labor market is from the U.S. in the next few parts to see if there are signs of deeper improvements in Brazilian economic variables that could lead to the country's social and economic growth that lasts longer. We look at differences in labor productivity, pay, and the structures of economic activities to see if there is a trend that points to more changes in Brazil's relative quality and structure.