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As Brazil’s Economy Grows, Its Manufacturing Struggles

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Jun 22

The buzz about the BRICs continues to grow and Brazil, in particular, has been in the spotlight. As its economy continues to thrive—so does its potential as a luxury market and, correspondingly, its domestic apparel consumption and production.

Brazil is currently the world’s sixth-fastest growing economy and the seventh largest country in terms of GDP. In 2010, the country’s GDP was $2.222 trillion, and in 2011, it was $2.282 trillion. (Women’s Wear Daily May 1, 2012 edition)

As more and more of the population ascends to the middle class, they are increasing their spending on apparel—resulting in a boost to production, according to new research from Textiles Intelligence. (Just-Style)

However, despite the increase in demand for apparel and textiles, Brazilian manufacturing is experiencing issues. Brazil’s manufacturing industry—and economy overall—struggles with a strong currency, high interest rates, high taxes, poor infrastructure and an undereducated work force as a result of a poor education system (The Economist). It’s just plain expensive to do business in Brazil right now—the currency is strong and Sao Paulo is the most expensive city in the Western Hemisphere (Women’s Wear Daily).

Half way around the world, another apparel producing powerhouse and economic giant, China, is Brazil’s biggest economic partner. Trade between the two nations has risen 17-fold over the last decade, according to a January 14, 2012, article of The Economist. While Brazil enjoys a trade surplus with China, it exports primarily raw materials, rather than value-added, manufactured products—a problem in the trade relationship for Brazil. As a result, the government of Brazil has taken some protectionist measures, such as increasing the tax placed on foreign cars.

With both Brazil and China experiencing increased GDP, wealth, consumer spending and domestic production coupled with rising costs of production and business, it remains to be seen how the apparel industry in both nations will be affected.

Notice: The WRAP blog may feature links to external sites as an enhancement to the post. WRAP is not responsible for the content of external internet sites.

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