Going back to 2010, Brazil’s GDP was worth $2.09tn, compared with the UK's $2.25tn (international Monetary Fund stats), placing Blighty firmly ahead. This week, however, the pointy-heads at NIESR have updated the IMF’s workings out. If NIESR’s maths is correct, Brazil's economy is now worth $2.52tn and the UK's is tailing behind at $2.48tn. Parabéns, Brazil.
But all is not quite as it seems. As the FT reports, two years ago, Brazil’s economy was growing at an annualised 7.5%. But the lion’s share of this growth came from government stimulus measures taken in 2009 to stave off recession. And the government didn’t stop there – it was a presidential election year and spending ballooned as President Dilma Rousseff sought to hang onto her seat.
And then along came inflation. Interest rates were hiked to try and counter the effects but, in mid 2010, the economy stalled. The real was also ridiculously strong against the dollar, killing local industry as cheap imports swamped the market.
Growth only returned once the real began to sink. It toppled 11% against the US dollar last year. Hence the sudden financial boost as local industry clunked into action again And then there’s the energy jackpot off Brazil’s coast: substantial caches of oil and gas have been found in the last few years and the country is now the world's ninth largest oil producer. It is these factors that have combined to push Brazil ahead of the UK (we may be about to lose our oil-rich North Sea territories to an independent Scotland to boot).
But as to whether Brazil can hang onto sixth place, the jury is out. Brazil’s finance minister is already hedging: ‘It is not important to be the world's sixth-biggest economy, but to be among the most dynamic economies, and with sustainable growth,’ Guido Mantega says. Meanwhile, the UK is doing its utmost to up exports to Brazil and other fast-growing economies and partner with big corporations in cash-rich nations. The state of the eurozone has expedited this strategy as British firms are forced to look further afield to make a crust.
So, while the UK may have been bumped down the economic pecking order, ultimately, it could profit enormously from Brazil’s ascendance.