Brazil’s Great Recession – Unemployment
Unemployment is highly dependent on economic activity; in fact, growth and unemployment can be thought of as two sides of the same coin: when economic activity is high, more production happens overall, and more people are needed to produce the higher amount of goods and services. And when economic activity is low, firms cut jobs and unemployment rises. Brazil experienced a severe economic crisis from mid-2014 onward. The cause of the crisis was mainly due to the 2014 commodity price shock, which negatively affected Brazil’s exports and reduced the entrance of foreign capital into the economy. The manufacturing industry which constitutes one-fifth of Brazil’s GDP, was mainly impacted by the economic crisis (export decline).During the economic crisis, high unemployment rates were reported throughout the country, and there was widespread uncertainty regarding Brazil’s economic future. Employees in the manufacturing sector mainly were being laid off. For example, In Sao Bernando, a city in Brazil famous for manufacturing, 32% of the labor forces lost their jobs after major players such as Ford pulled out of doing business in Brazil. A trend of losing huge manufacturing agencies was witnessed throughout the country and continued for many years after the crisis; further increasing the unemployment rate.Till today Brazil is still recovering from the 2014 recession specially after the setback that Covid imposed on the recovery process.
The solution revolves around increasing Brazil’s overall competitiveness in the manufacturing industry. This can be achieved by making certain industrialized areas in Brazil more habitable for the manufacturing industry. This can be achieved by lowering tax rates in these areas, building more roads and offering facility services for pledged investors. Hence, increasing job vacancies.
Solutions
- Decreasing corporate tax rates in areas fit for industrial applications
- Facilitating foreign companies’ set-up process by building more roads in inhabited areas and providing facility services to future investors
- Provide additional benefits and services to current investors
Recommendations
- Utilizing the agriculture and oil resources
- Focus on talent development, innovation and education with special emphasis on elementary education, science and technology disciplines