Approximately two-thirds of the Brazilian GDP derives from the service sector, a share similar to that of economies in a more advanced stage of development and with much higher per capita income. Employment is also largely concentrated in the service sector, which accounted for 70 percent of the total in 2021. For instance, the retail, trade and automobile repair sector employs the largest workforce in the country, with nearly 11.63 million employees. The hospitality industry and the financial sector also contribute noticeably to the dominance of the service sector.
From the commodity boom to a recessionBrazil experienced a remarkable economic growth during the commodity boom between 2000 and 2014. In this period, the prices of and demand for commodities like oil, food crops, and metals grew steadily, boosting Brazilian exports and providing the country with employment and labor income gains, as well as large earnings, which were redirected towards social transfers that tackled poverty and inequality. In those years, Brazil and the rest of the BRICS countries –Russia, India, China and South Africa- showed promising rates of economic development.
Nevertheless, commodity revenues are volatile by nature and the Brazilian economy is characterized by cycles of booms and busts, and so the current economic situation of the country is not as buoyant as it once was. Even though the economy has partially recovered from the recession experienced between 2014 and 2016, GDP growth has been modest during the past few years, staying below two percent in the years preceding the pandemic, far from the values registered in the first decade of the 21st century, when annual GDP change exceeded five percent on several occasions. Despite the bust in commodity prices, trade has been gaining traction in relation to the national GDP. The fact is that Brazil has established itself among the world giants in many resource-related sectors, particularly agriculture, manufacturing and mining, thanks to its richness in natural resources. For instance, the Portuguese speaking country is the main global exporter of soybean, coffee and beef, as well as one of the largest producers of biodiesel, crude oil, and bauxite worldwide, among other crops and minerals. On the flip side, the development of these industries is also closely linked to deforestation in the country.
FDI and unemploymentAfter the 2014 commodity price shock and the economic recession that followed, foreign direct investment (FDI) inflows to Brazil experienced a downturn. Having surpassed 90 billion U.S. dollars in 2012, in 2020 FDI in Brazil amounted to merely 44.7 billion dollars. However, in 2022, the FDI surpassed 91 billion U.S. dollars, with half of it being directed towards the service sector. As a result, Brazil remained as the country with the largest inflows in the region, proof that it is still regarded as an attractive market for international investors. On the other hand, sub-optimal infrastructure, high transportation costs, low productivity and political instability are some of the reasons that keep hampering investment in the country.
With the pandemic years behind, the Brazilian unemployment rate dropped to 9.46 percent in 2022, which represented a reduction of 3.7 percent when compared to the previous year. Unemployment was more pervasive in the Northeast, North and Southeast regions, as well as among black and brown-skinned people (also referred to as pardos). Another problem is the persistence of informal employment, which has oscillated between 40 and 47 percent in recent years. Despite such a high rate, Brazil presented in 2022 one of the lowest rates of informal employment in Latin America.