Brazil has the largest economy in South America and the ninth largest in the world. However, income distribution is highly unequal and poverty affects more than one-third of the total population. Unequal land distribution is a contributing factor: nearly half of all private lands are owned by only 1 percent of the people. Many of the landless live in favelas (shantytowns) on the outskirts of urban centers.

Hyperinflation and low growth marked the 1980s and early 1990s. In 1994, Cardoso introduced a new currency, the real (R$), as part of a program that dramatically cut inflation. Inflation was about 6 percent in 2000, and the government hopes to cut it to 4 percent in 2001.

The government's failure to cut spending following the Asian financial crisis in 1997 weakened investor confidence in the Brazilian currency. In January 1999, the government was forced to devalue its currency by more than 40 percent, plunging the country into crisis. Government spending cuts, tax increases, high interest rates, and other emergency measures were implemented to strengthen the real and stop the flight of foreign capital. However, despite predictions, the economy grew by almost 1 percent in 1999; growth in 2000 reached about 4 percent, and similar rates are expected for 2001. Unemployment is 7.1 percent overall and close to 20 percent in São Paulo.

Brazil is largely self-sufficient in food and consumer goods. Agriculture employs about 30 percent of the population. Brazil is the world's largest producer of coffee, oranges, and bananas. It also is a major producer of soybeans, corn, cocoa, beef, pork, and rice. Much of Brazil's sugarcane is used to produce ethyl alcohol, a fuel used in more than 1.5 million Brazilian cars. The industrial sector exports automobiles and parts, textiles, minerals, iron ore, steel, and metals; other industries include cement and chemicals. Natural resources include gold, nickel, tin, timber, and oil. A series of oil spills in 2001 affected not only the economy but also the environment. Hydroelectric dams generate most of their electric power. Brazil is a member of MERCOSUL, a regional free-trade pact that includes Argentina, Paraguay, and Uruguay.