Brazil - Introduction

Brazil's gross domestic product (GDP) grew only slightly in 1988 to $277 billion at current prices.2 The growth rate was the smallest registered since 1983, when the rate was minus 2.8%. The economy's performance was strongly influenced by a 2% to 3% decrease in industrial production and civil construction. The mineral industry, however, countered the downward trend in the industrial sector and grew a modest 1.4%. In November, Brazil adopted a new Constitution that placed significant restrictions on foreign investment in the mineral industries. Under certain provisions of the new Constitution, foreign companies were prohibited from establishing new mining ventures in Brazil as sole or majority owners. They could now enter the mineral industry only as minority shareholders with Brazilian partners. Foreign companies already established in Brazil had a 4-year grace period to find majority Brazilian partners, or to establish vertically integrated processing operations (mining, processing, smelting, and refining). The new Constitution also prohibited foreign risk contracts for petroleum exploration.