"Brazil's Resource Curse.

In 2007, Brazilian geologists discovered the largest oil deposits in three decades in the Americas.

"The black gold rests eight kilometers below sea level and accounts for 62% of the country's current crude oil reserves. Brazil has long used its natural resources: it is the largest exporter of coffee, sugar, orange juice and beef. Brazil has struggled for half a century with its dependence on commodities, the so-called "resource curse. Depending on where oil profits are channeled, it could lead the country either to a new stage of development (e.g., Norway) or set the nation back (e.g., Russia), say economists at Goldman Sachs Group in New York. Increased demand for food and metals as Asia industrialized has tripled commodity prices, helping Brazil overtake Italy and Spain to become the sixth largest economy in the world. Rising prices of Brazilian iron ore and soybeans nearly sevenfold, increased foreign direct investment. The benefits of the resource boom are widely known. It helped lift millions of Brazilians out of poverty and the country out of debt. Nevertheless, fluctuations in commodity prices can be significant, leaving resource-rich countries vulnerable. In most countries, productivity growth in emerging economies comes from manufacturing, not agriculture or mining, according to analysts at Capital Economics in London. One of the consequences of the "resource curse" is that non-resource sectors of the economy tend to shrink in response to the expansion of the resource sector, i.e., scissors emerge. Perhaps in this economic system, it is much harder to become a major producer of goods.

To be continued...



Based on foreign press for ForTrader.org

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