Multimedia Mania/abacus-multimedia-mania.iso/dp/0013/00131.txt

Text File | 1993-07-27 | 35KB | 547 lines

$Unique_ID{bob00131}
$Pretitle{}
$Title{Brazil
Chapter 3A.   The Economy}
$Subtitle{}
$Author{Darrel R. Eglin}
$Affiliation{HQ, Department of the Army}
$Subject{percent
economic
coffee
development
exports
brazil
government
growth
economy
industry
see
pictures
see
figures
}
$Date{1982}
$Log{See Tossing Coffee Beans*0013101.scf
}
Title:       Brazil
Book:        Brazil, A Country Study
Author:      Darrel R. Eglin
Affiliation: HQ, Department of the Army
Date:        1982

Chapter 3A.   The Economy

[See Tossing Coffee Beans: Man tossing coffee beans to clean and dry them]

     Brazil is a large developing country, fifth largest in the world in area,
sixth largest in population, and tenth largest in economic size. For nearly
five centuries it has undergone development, and in this century economic
growth has been rapid and sustained. Between 1932 and 1979 real gross national
product increased an average of 6.3 percent a year and industrial output by
about 9 percent a year. In 1981 the gross national product was the equivalent
of US$250 billion, about US$2,000 on a per capita basis. Brazil could be
classified a newly industrialized nation by some measures.

     In 1982 the country continued to have a huge agricultural sector that
supplied produce for domestic consumption and raw and processed exports.
Brazil was one of the world's larger exporters of agricultural products. At
the same time, only four industrialized countries had as large a share of
gross domestic product contributed by industry. Only eight developed nations
exceeded the absolute value of Brazil's industrial production. The nation's
steel industry ranked tenth in the world and the chemical industry seventh.
Industry produced a wide range of consumer and producer goods. Manufactured
exports included arms, airplanes, made-to-order capital equipment, and
electronic gear.

     Nevertheless, vast portions of the country were scarcely inhabited. Huge
deposits of minerals, large stands of timber, and many hydroelectric sites
remained for exploitation. Modernization had been localized geographically and
in terms of the population. Many people were extremely poor and lived in
primitive conditions. Further development and improvement of the situation of
the disadvantaged depended on prosperity in world markets and a flow of
foreign capital, because the scale and number of projects in Brazil exceeded
the country's own resources. In the early 1980s foreign help was difficult to
obtain, and the country faced a period of austerity to meet payments on
earlier loans. How the population would react to slowed economic growth after
a half-century of rapid expansion remained to be seen.

Growth and Structure of the Economy

     After the arrival of the Portuguese in 1500, economic development of
Brazil became linked with the political and economic situation in the major
nations of the world. Because of excessive reliance on one or two export
commodities throughout most of its history, economic growth has been largely
in fits and starts, reflecting changing market conditions abroad. After
nearly five centuries of development, Brazil's economy has become more
diversified and less dependent on just a few commodities. Nonetheless, even
in 1982 the country's economic well-being was still closely related to
international commodity and financial developments.

     The Portuguese who discovered and claimed the land that became Brazil
did not know its extent. In fact, the present boundaries of Brazil were
established only over the centuries. The country is larger than Western Europe
or the 48 contiguous states of the United States. Exploration, colonization,
and development progressed unevenly, often in terms of the five geographical
regions: the Northeast (Nordeste); the North (Norte), which included most of
the Amazon Basin; the South (Sul); the Southeast (Sudeste); and the
Center-West (Centro-Oeste) (see Geography, ch. 2). The uneven regional
development pattern remained a problem in the 1980s.

     Portugal's small population and limited resources restricted the
development that could be attempted in its Brazilian colony, particularly
because its Asian possessions appeared richer and at first received priority
(see The Colonial Period, ch. 1). Economic development in the first years
after discovery was largely confined to cutting brazilwood for export to
Europe where the extract from the wood was used as a textile dye. This
activity was confined to coastal areas and required few workers and little
in the way of infrastructure.

     By the mid-sixteenth century more extensive development was under way,
based on the cultivation of sugarcane and the export of sugar. The Portuguese
mastered the techniques and became sugar exporters as a result of large-scale
experiments on the Azores and Madeiras during the late fifteenth century. The
experience proved highly profitable when applied in Brazil's Northeast region.
Sugar became the dominant crop. By the late sixteenth century sugar was one
of the main commodities in international trade, and Brazil had become the
major source. When the Dutch occupied northeastern Brazil (1630-54), they
learned the sugar business and created a competitive industry in the
Caribbean. The enlarged supply forced down sugar prices during the latter
half of the seventeenth century, and prices remained low for more than a
century. After 1650 the volume of Brazil's sugar exports fell by about 50
percent at the same time that the price per ton dropped more than 50 percent.

     The sugar boom provided the stimulus for the initial development of
colonial Brazil. The cultivation of sugarcane was most economical on large
areas, such as plantations, and required a large supply of cheap labor.
Although some settlers arrived from Portugal, most of the labor in the sugar
industry came from slaves-both indigenous Indians and blacks from Africa.
Some of the Portuguese settlers relied on the capture and sale of Indian
slaves to plantations for their livelihood. Other settlers raised livestock,
which the plantations needed for draft power and meat. Other settlers took
advantage of homesteading laws and became subsistence farmers or sold their
small surplus produce to the plantations and emerging urban centers. Sugar
processing required substantial amounts of wood for fuel. Although the sugar
industry was largely confined to the Northeast (with a minor center near Rio
de Janeiro), close to the sea for ease of transport, the settlers increasingly
had to push inland to enslave Indians, to obtain wood, and to find grazing
areas for the expanding cattle herds.

     The next surge of development, lasting through most of the eighteenth
century, was based on mineral exports. The primary product was gold, but
exports included diamonds and other gemstones. Gold mining was mainly
alluvial panning, a labor-intensive activity. Mining was concentrated in the
area that became the states of Minas Gerais, Goias, and Mato Grosso, shifting
the economic center of colonial Brazil southward from the Northeast
(see fig. 1). Gold attracted workers not only from the Northeast sugar areas,
including slaves, but also substantial numbers from Portugal itself. Gold
exports peaked during the 1750s; prosperity subsequently declined in the
mining industry. The search for gold had revealed rich iron ores, however,
which formed the basis for a small, emerging ironworking industry,
fabricating tools and some machinery. Farming, cattle raising, and crafts
expanded to meet the needs of the growing population and expanding economy.
Transport was primarily by boat, so shipbuilding, repair, and supply (sails,
rope, and so forth) became important. Mining stimulated a variety of
activities, although they remained small scale and localized.

     After the mid-1700s the mining boom subsided, and the economy settled
into nearly a century of stagnation. Production was largely for subsistence
or on nearly self-sufficient units, although some exports of sugar, hides,
cotton, cocoa, and a few other commodities continued. International price
levels for these exports tended to remain low, however, greatly reducing the
profitability and the stimulus provided to economic growth compared with
earlier periods.

     Coffee was introduced into Brazil in the early 1700s, but cultivation
was widespread and for local consumption. Coffee began to acquire commercial
importance late in the eighteenth century as international prices rose because
of disruption of supplies from other countries. By the 1830s coffee exports
accounted for 18 percent of the value of Brazil's exports and ranked third
after sugar and cotton. By the mid-1800s coffee was the country's leading
export, amounting to more than 40 percent of total exports (see The Economy
under the Later Empire, ch. 1).

     Initially, coffee for export was cultivated primarily in the hills
behind Rio de Janeiro because of the ease of transport to ports and the
availability of labor no longer employed in mining. Early development relied
mainly on slaves working on large plantations. Contrary to the sugar industry,
in which foreigners controlled the trade, transport, and financing, local
entrepreneurs were involved in both the production and the commercial ends of
the coffee business. They formed a new managerial class that exerted
considerable influence on Brazil's future development. As soil fertility
declined over the years, coffee production shifted to additional areas,
mainly southward into Sao Paulo and later into Parana and Rio Grande do Sul.

     From the beginning the coffee boom increased foreign trade, transport,
and incomes, adding to demand. Once the underemployed resources remaining
from the mining boom were engaged in production, expansion of coffee exports
required committing more resources. The need for additional workers became
critical. Increasing antislavery efforts diminished and then in the 1850s
abolished the import of slaves, and slavery itself became illegal in 1888 (see
The Slavery Question, ch. 1). An expanding flow of immigrant wage labor from
Europe, particularly Italy, provided additional workers for expanding coffee
production. Various measures by the government and coffee growers, especially
after 1850, facilitated emigration from Europe, which became quite large by
the late 1800s. These European immigrants brought technical and
entrepreneurial skills, which contributed substantially to Brazil's subsequent
development (see Immigrants of the Nineteenth and Twentieth Centuries, ch. 2).

     The coffee boom accompanied other major changes in the country's economic
situation. In 1785 a royal decree banned almost all manufacturing in the
Brazilian colony. After the Portuguese court fled to Brazil in 1808, the
prohibition was rescinded, and manufacturing and other development was
encouraged. In 1844 the Portuguese trade treaty with Britain that had
effectively stifled any industrialization in Brazil for nearly a century and
a half expired. After the lapse of the treaty, emerging manufacturing
industries received tariff protection (see Problems of Foreign Policy, ch. 1).
In 1889 the country became a republic in which landowners and businessmen
exerted strong influence on government policies.

     In the second half of the nineteenth century, considerable expansion and
diversification of the economy occurred. Profits from coffee exports provided
funds for expansion of coffee production and industrial investments. The
foreign exchange earnings from coffee instilled confidence so that foreigners
invested in and developed railroads, electric power plants, and other
essentials for economic development (see Economy under the Later Empire,
ch. 1). The railroad from Santos to Sao Paulo and westward, for example,
initially opened new areas to coffee production and subsequently to
industrialization. The railroad was an important ingredient in the
concentration of manufacturing in Sao Paulo. Celso Furtado, a well-known
Brazilian economist and former economic minister, estimated the growth of
real per capita income at about 1.5 percent a year over the last half of the
nineteenth century, a rate probably above that for Europe or the United
States.

     This substantial rate of economic growth was not shared equally by
region. Development and growth were concentrated in the center and southern
coastal states. Moreover, the influx of Europeans, the development of
transportation and infrastructure, and the start on industrialization in the
area of Sao Paulo-Rio de Janeiro ensured that the Southeast would have a
long-lasting edge over other regions in growth and development. The South
achieved considerable development based on coffee and other agricultural
products.

     The Amazon Basin experienced a meteoric rise and fall of incomes from
rubber exports. Amazonian Indians had long tapped rubber trees for their own
use, and exports from Brazil began in the 1820s. Exports remained low
(averaging less than 2,000 tons a year) until mid-century but then began to
expand, particularly with development of the automobile, averaging 35,000
tons a year in the first decade of the twentieth century. By World War I
rubber plantations in Asia, stocked with seedlings smuggled out of Brazil,
were producing at lower costs and quickly took over most of Brazil's markets.

     The Northeast largely stagnated once the sugar boom subsided in the late
1600s. Agriculture remained the primary activity. Cattle, sugar, and cotton
were the main products, each of which experienced short periods of prosperity
when international conditions and prices turned favorable. Cotton exports, for
example, became substantial when the American Civil War shut off supplies
from the United States. For most of the time, however, the population lived
close to the subsistence level. By the latter part of the 1800s, there were
already signs of growing population pressure on the land when an extremely
serious and protracted drought from 1877 to 1880 damaged crops and killed most
of the livestock. Famine also killed a large number of the rural population,
and many refugees flooded urban centers. Numerous inhabitants of the Northeast
(Nordestinos) moved to the Amazon Basin to become rubber collectors in that
area's development surge. When rubber exports fell after World War I, the
Amazon population essentially reverted to subsistence activities.

     The coffee industry continued to expand up to the Great Depression of the
1930s. By the end of the 1880s Brazil was supplying about three-quarters of
the coffee in international trade. Coffee production amounted to about 3.7
million 60-kilo bags in 1880, about 16.3 million bags in 1901, and about 28.9
million bags in 1929. A growing excess of supply began to push world coffee
prices down, but by the early 1900s Brazilian growers were able to obtain a
domestic support program that held part of the yield off world markets and
kept export prices high (see The Economy under the First Republic, ch. 1). The
high support prices encouraged greater production, however, which increased by
nearly 100 percent between 1925 and 1929 alone because of the expansion of
plantings. In the late 1920s coffee exports accounted for over 70 percent of
export earnings. By the late 1940s coffee remained Brazil's major export, but
coffee exports had dropped to 42 percent of the value of the country's total
exports; the country's share of the world coffee trade had fallen to a little
more than 50 percent.

     The coffee boom spurred industrialization late in the nineteenth century
(see Manufacturing, this ch.). By the 1920s the industrial sector was well
established. The sharp fall in international coffee prices in the world
depression of the 1930s required severe contraction of imports, which prompted
local manufacturers to produce substitutes for foreign goods no longer
available. Government policies and investments also furthered
industrialization (see Role of Government, this ch.). Although the Great
Depression imposed major adjustments and a reduction of production, by 1934
the economy's output had regained the 1929 level. Expansion continued at a
slow pace. Furtado estimated economic growth at a little above 2.5 percent a
year between 1929 and 1947, only slightly above population growth.

     Brazil emerged from World War II with considerable pent-up demand and
substantial foreign exchange reserves. Relaxation of trade and currency
controls resulted in a high level of imports and exhaustion of these reserves
by the early 1950s. A concerted, successful drive to attract foreign capital
investment (especially in the automotive industry), restriction of imports,
and government incentives stimulated industrialization, which contributed to a
high level of economic growth. Between 1945 and 1962 industry grew at an
average rate of 8 percent per year, and real gross domestic product (GDP)
increased by 6.8 percent a year between 1950 and 1961. For the first time in
Brazil's history, internal demand rather than external factors provided the
stimulus for economic growth.

     The rapid expansion of manufacturing was primarily based on substitution
for imports. Exports increased slowly, and manufactured exports (excluding
food) were less than 7 percent of total exports by 1962; coffee accounted for
53 percent of total exports. Although imports also increased slowly,
large-scale foreign borrowing was necessary to balance international payments.
Other major imbalances appeared. Government policies discriminated against
the agricultural sector (except coffee and sugar where the producers retained
considerable influence), while contributing to inefficiencies in industry.
Growing budget deficits and accompanying monetary expansion accelerated the
rate of inflation, which exceeded 100 percent at times in 1964. Social unrest
spread in the early 1960s (see The Crisis of 1961, ch. 1). In 1963 economic
growth was only 1.6 percent, which meant a decline in per capita terms.
The economy was plagued by shortages and dislocations, and the country fell
behind in meeting foreign debt payments.

     In 1964 the military took over the government to restore order. An
economic stabilization program was instituted, but changes were gradual rather
than drastic in order to avoid a major recession. The foreign debt was again
rescheduled. Government expenditures were curtailed, and budget deficits were
reduced. Price and wage controls were imposed along with other measures. The
effects reduced the rate of growth of GDP to an average 3.6 percent a year
and industrial output to 3.6 percent a year between 1964 and 1967. The rate
of inflation was reduced to 27 percent by 1967. The program effectively
adjusted the economy for a return to high rates of growth.

     The period between 1968 and 1974 has often been called Brazil's economic
miracle. GDP increased at the impressive average rate of 11.5 percent a year:
manufacturing at 13.9 percent a year and agriculture at 5 percent a year.
These high rates of growth resulted in part from expansionary government
policies and a return to production of the considerable idle manufacturing
capacity that existed in 1967. In addition, a substantial expansion of world
trade and a high level of capital movements created a favorable international
environment. Brazil's exports increased an average of 27 percent a year while
exports of manufactured goods rose 38 percent a year. Moreover, the rapid
economic growth was accompanied by declining inflation and a modest rise in
the external debt. Some economists argued that it was not a miracle but merely
a return to sensible policies that allowed the economy to catch up with its
long-run potential after being diverted by poor economic management.

     Brazil has a high income elasticity of import demand-meaning that imports
grow substantially with each increment in GDP. This reflects the economy's
need for sophisticated capital equipment and many primary and intermediate
goods produced domestically in insufficient quantities or not at all. World
inflation in the 1970s, particularly the quadrupling of crude oil prices in
1974, caused Brazil immediate difficulties in paying the higher value of
imports, even though export growth had been considerable. In addition to the
sudden deterioration in terms of trade, agricultural production-particularly
food for domestic consumption-began to falter, and aggregate demand became
excessive. After 1973 the balance of payments imposed constraints on growth
while inflation accelerated.

     Officials attempted to sustain as high a rate of growth as possible.
Between 1973 and 1978 GDP increased an average of 7 percent a year even though
there was substantial variation from year to year. Imports were restrained
through a variety of measures, and import substitution was encouraged. Crude
oil imports were reduced, for example, and a noteworthy, but long-term,
program of fuel production from sugarcane was begun (see Energy, this ch.).
The other major recourse to sustained growth was to borrow abroad. Brazil's
foreign indebtedness increased sharply in the 1970s, expanding nearly fourfold
between 1973 and 1978.

     In 1979 the economy suffered serious setbacks. Substantial crop losses,
because of drought in the southern states and flooding in other parts,
increased domestic prices and caused a loss of about US$1.8 billion in the
balance of payments. Subsidies and other public expenditures proved difficult
to control, adding to fiscal deficits, while the money supply increased more
than expected. Inflation mounted to 77 percent for the year. Oil exporters
again drastically increased prices. In 1979 the prices of oil to Brazil nearly
doubled, and the increases were about the same in 1980. The country depends on
imports for about 75 percent of its petroleum supplies, and the oil import
bill was about US$10 billion in 1980. The setbacks slowed economic expansion
to 6.4 percent in 1979, but real GDP increased 8 percent in 1980 because of
good agricultural harvests and increased industrial production-both sectors
boosting exports.

     A series of expansionary measures begun in 1979 stimulated an already
overheated economy and was reversed by early 1981. Contraction brought on the
most severe recession in more than 30 years. In 1981 real GDP declined by 3.5
percent and by 5.8 percent on a per capita basis. The industrial production
index fell 9.6 percent and that for just manufacturing by almost 10 percent.
Automobile and truck production was the most seriously affected, dropping by
33 percent. In contrast, the agricultural sector grew by 6.8 percent.
Declining industrial activity caused unemployment to rise, and real wages
fell. Contraction of the economy reduced inflation less than hoped. The price
index (December to December) was up 95 percent compared with 110 percent in
1980.

     The country's large foreign debt was a major concern to officials and
international bankers. Substantial foreign loans were needed annually to meet
existing debt obligations. In 1981 world bankers were closely watching the
economic management of Brazilian officials. In 1982 several countries, such as
Mexico, Argentina, and Poland, experienced difficulties in making debt service
payments; some required rescheduling of their debt. As a result the
international banking community was examining the risks in additional loans to
developing countries. By late 1982 Brazil reportedly found it difficult to
borrow the final sums necessary to meet its debt service. Although the economy
was much more diversified than in its earlier history, the country's economic
health still depended significantly on developments in the world's commodity
and financial markets.

     The changing structure of the economy has been quite remarkable since
World War II. The most profound change has been the decline of agricultural
activities and the expansion of industry. In 1947 agriculture (then the most
important sector) contributed about 28 percent of GDP compared with 10 percent
in 1980. In contrast, industry, including energy, mining, and manufacturing,
increased from 22 percent of GDP in 1947 to thirty-eight percent in 1980.
Various services accounted for 50 percent of GDP in 1947 compared with 53
percent in 1980. The change in employment was also considerable. In the 1950
census 64 percent of the work force was employed in agriculture, compared with
13 percent in industry. In 1979 about 32 percent of the economically active
population worked in agriculture and 24 percent in industry, including
construction.

     The contrasting growth patterns of industry and agriculture reflected
what some economists called Brazil's dual economy. Industry used modern
techniques and attained high productivity. Associated with industry in the
modern sector were trade, transportation, and finance. In 1970 this modern
sector was estimated to account for about 85 percent of GDP and to employ
about 45 percent of the nonagricultural labor force, although two-thirds of
these workers were in low-skilled jobs. The importance of the modern sector
increased during the 1970s.

     Agriculture used largely traditional practices having low productivity.
Few farmers used modern techniques and inputs to lift yields. Before the 1980s
agricultural output had been raised primarily by extension of the cultivated
area. Opinions differed on the suitability for cultivation of the remaining
new lands, which were primarily located in the Amazon basin. Some argued that
Amazon soils could sustain continual production with care. Opponents claimed
the opposite and pointed to significant ecological damage once the forest
cover was cut. Officials recognized that agricultural output needed to grow
more rapidly and that much could be done to raise yields from lands already
cultivated. The need was becoming most acute in basic food supplies, the
imports of which were increasing (see Crops, this ch.). It was a long-term
problem, however, because considerable institutional development and
infrastructure building would be necessary to distribute inputs and move the
resulting produce to markets.

     Although the transportation system was adequate for the current needs of
the economy, new economic development usually required major investments in
ancillary transportation services. Before the 1930s roads and railroads
primarily linked production centers to seaports, and there were some
connections between major urban centers. By the 1980s a start had been made
on a national road system connecting the various parts of the country.
Construction costs were high, and maintenance had proved costly, however,
slowing extensions to the system as well as the addition of feeder roads
off the system. In a country as large as Brazil with its difficult terrain, a
developed transportation system, such as exists in the United States or
Europe, remained many years off (see fig. 7).

     Housing and services such as water and sewage were underdeveloped
portions of the economy. By the 1980s the rural to urban migration had
overwhelmed the available facilities. All Brazilian cities had large
shantytowns (favelas), constructed by migrants from scraps and other available
materials (see Forces of Change, ch 2). The national and lower levels of
government were improving the supply of adequate housing, potable water, and
sewage systems, but it would take years to eliminate the deficiencies.

Role of Government

     Historically, government has exerted or attempted to exert considerable
influence in Brazilian economic affairs while leaving actual economic activity
to private initiative. In the colonial period the government in Portugal
primarily wanted revenue, especially gold, from its Brazilian colony. Local
manufacturing was suppressed to maintain a profitable market for imports.
During the imperial period (1808-89) economic development was promoted through
policy measures requiring little direct government participation. Governments
under the First Republic (1894-1930) were dominated by large landowners.
Government policy continued to influence the direction and pace of economic
activity, largely for the benefit of the agricultural crops of the landed
elite; direct government participation was mostly limited to managing surplus
stocks of coffee beans. After the 1920s direct government involvement
increased, but its role remained primarily one of influencing and managing the
activities of the private sector. Social goals, such as equity of income
distribution and minimum standards of housing, education, nutrition, and
health care, increasingly became government goals. Public ownership remained
small, however, although influential in key activities.

     After World War II, officials opted to continue rapid industrialization
of the economy as the means to achieve high growth rates and the social
objectives being expressed through the political process. In times past when
external events stimulated local industry, official policies returned to
guiding the economy as an exporter of primary products, almost completely
agricultural, as the stimulus subsided. The policy change in the late 1940s
was supported by recommendations made by foreign economic missions in the
1930s and 1940s. The experience of the collapse of coffee prices in the 1930s
depression and the subsequent growth of industry reinforced the experts'
recommendations. Moreover, many in the population sensed the country's large
economic potential. National security considerations further motivated the
policy switch to greater industrialization.

     The policy change was marked by the creation of a planning agency in the
late 1940s and the first of a series of multi-year plans to guide the economy.
Planning subsequently was conducted by a ministry, and in 1974 the Planning
Secretariat of the Presidency was created. The first plan became effective in
1950 and was largely a public works list that focused on easing bottlenecks in
transportation and energy, particularly electric power. A shortage of funds
restrained full implementation.

     Over the years the planning staff gained experience and competence, and
the multi-year plans became more sophisticated and comprehensive. The plans
provided a guide for development and helped avert bottlenecks. At times,
however, the plans were thrown off by external events and domestic
developments over which the planners had no control. The bulk of economic
activity in Brazil is conducted by individuals. State governments have
organizations influencing economic development in their areas, including
some state plans and state-owned businesses. At the federal level a
bewildering, overlapping array of economic organizations and funds was
created, over which the federal government often exerted little control or
even had timely knowledge of their activities until the 1980s. Planning and
coordination in such a milieu was difficult at best.

     In the late 1970s some 500 federal decentralized agencies existed in
addition to the economic ministries and interministerial bodies. The
proliferation of economic organizations was a pragmatic response to specific
conditions rather than an evolution under an organizational plan. The
responsibilities and importance of individual agencies varied tremendously as
did their autonomy. In perhaps an oversimplification, a group of autonomous or
semiautonomous organizations called autarquia (often containing the words
institute or superintendency in the English translation of their name) were
similar to some regulatory agencies of the United States government. One of
the most important of these autonomous entities was the Central Bank of
Brazil, formed in 1964. One of the earliest was the Brazilian Coffee
Institute, created shortly after the turn of the century. The Superintendency
for Development of the Northeast (Superintendencia do Desenvolvimento do
Nordeste-SUDENE), established in 1959, and the Superintendency for the
Development of the Amazon (Superintendencia do Desenvolvimento da
Amazonia-SUDAM), formed in 1966, were responsible for development of their
respective areas.

     For some activities, wholly government-owned corporations were
established. The National Steel Company (Companhia Siderurgica Nacional) was
formed in the 1940s to own and operate the Volta Redonda steel mill. One of
the most important was the National Economic Development Bank (Banco Nacional
do Desenvolvimento Economico-BNDE) formed in 1952 to finance public and
private industrialization. In June 1982 the name was changed to National
Economic and Social Development Bank (Banco Nacional do Desenvolvimento
Economico e Social-BNDES). Other corporations were established as mixed
companies formed under the general corporation law but authorized by specific
legislation. The federal government held at least a majority of shares, but
other investors could participate. The Brazilian Petroleum Corporation
(Petroleo Brasileiro-Petrobras), formed in 1953, was a mixed company and
Brazil's largest corporation. There were many companies, owned wholly or
partly by the federal government, that were important in the economy; for no
apparent reason some had private investors. States also formed companies,
particularly banks, to aid and influence development in their areas.

     In general, government ownership in companies, as a whole or in part, was
intended to stimulate development. In the case of electric power, private
companies were limited in financial and physical resources to expand to meet
rapidly increasing demand. A mixed government company was formed gradually to
take over local companies, develop hydroelectric sites, and interconnect, by a
grid, generating and distribution facilities (see Energy, this ch.). In some
instances, steel and petrochemicals, for example, the initial stages were too
costly or risky for private investors. The government financed and built
plants to process the raw materials, leaving upstream and downstream
operations to private investors, domestic and foreign, who often had federal
or state help in financing mines or fabrication plants. Governments at various
levels also took over and frequently subsidized portions of the transportation
system to provide essential services at low cost.