Overview of factors that help explain Brazil’s emerging market status

Introduction

Brazil’s economy offers many insights into its status as an emerging economy. Brazil has the largest economy in Latin America and has one of the largest economies globally. There have been several advancements across different parts of Brazil’s economy that have supported its growth, but the economy is still constrained, making it more difficult to become more developed. In particular, the service and industrial sectors have significantly advanced Brazil’s economy by contributing to its GDP, but the economy still faces several issues, such as income inequality and corruption, that have hindered Brazil’s development.

Service sector

Brazil has experienced growth trends over the years, driven by significant contributions from its sectors. One notable sector of Brazil’s economy is its service sector, which is its most significant contributor to growth, as it has historically supported Brazil’s GDP. For instance, the value added by the service sector as a percentage of GDP was around 59.2% in 2023 (World Bank, 2026), up from 58.1% 2022 (World Bank, 2026). Although the contribution to GDP was not as high as in 2020, when value added was approximately 61.45% (World Bank, 2026), the recent increase in the service sector's share of value added has positive implications for Brazil’s growth. Additionally, the service sector has been dominant in absorbing employment in Brazil, with the service sector employing around 72% of the country’s workforce (Lloyds Bank, 2025). This further supports the idea of the service sector being a dominant sector of Brazil’s economy.

Brazil’s service sector includes various economic activities, with some notable ones being financial services and fintech, retail and wholesale trade, hospitality, tourism, etc. For instance, tourism generated a revenue of around US$7.431 billion in 2024 (Lloyds Bank, 2025), as Brazil offers many attractive places for travellers to enjoy, and retail trade sales experienced a 4.7% increase in 2024 (Lloyds Bank, 2025).

Furthermore, Brazil’s financial services and fintech play an important role in the country’s services sector. A significant development within financial services and fintech over the years was the launch of Pix, Brazil’s instant payment system developed by the Central Bank of Brazil. Pix has allowed for payments in real-time to be processed (Galileo, 2025), with around 57 billion transactions being processed in 2024, and the amount approximating US$3.8 trillion (Galileo, 2025). Additionally, Brazil’s fintech industry has experienced significant growth, with the number of fintech companies increasing over the years, and digital banking companies such as Nubank and Banco Inter have incentivised innovation in financial services and fintech. These aspects make financial services and fintech a crucial component in Brazil’s service sector.

Industrial sector

The Industrial sector is also an essential component of Brazil’s economy that has supported its growth over the years. Although its contributions have not been as notable as those of the service sector in recent years, which could be explained due to a shift towards services, it has still produced significant results in the growth of Brazil’s economy. The industrial sector includes activities such as manufacturing, mining, construction, etc. The industrial sector's value added as a percentage of GDP increased after 2020, rising from 19.5% in 2020 to 20.9% in 2024 (World Bank, 2026). It is worth noting that the value added by the industrial sector was significantly higher during the 1980s, with the highest value added reaching 46.6% in 1984 (World Bank, 2026).

In the 1960s-1970s, the industrial sector in Brazil experienced significant growth, which was driven by investment in manufacturing and infrastructure. It was influenced by a combination of factors, such as import-substitution industrialisation and an increase in industrial exports, and this growth during the 1960s-1970s seemed to have a positive effect on the value added by the industrial sector in the 1980s, based on the cited data. The industrial sector also experienced growth in the 1980s, but it also faced challenges that hindered its expansion, including high inflation and an overwhelming debt crisis. That said, the industrial sector has contributed positively to Brazil’s overall GDP, and despite the shift towards services, it remains an integral component of Brazil’s economy.

Challenges

So far, the focus has been on some of Brazil’s economic strengths, but it is crucial to acknowledge the challenges it has faced that could explain why it is not classified as a developed country. One of the issues Brazil faces is income inequality, which has been considerably higher than in many developed countries, such as the UK. For example, the Gini coefficient of per capita household earnings in 2024 was 0.506 in Brazil (IBGE, 2025), and in previous years it was higher, with 0.544 in 2021 and 0.518 in 2022 and 2023 (IBGE, 2025). Although the Gini coefficient decreased in 2024, a Gini coefficient of 0.506 indicates that there is significant income inequality in Brazil. This could be due to many reasons, such as the benefits of economic growth not being evenly distributed across the population.

Additionally, the overall quality of human capital may not be as high as that of other developed countries. The quality of education in public schools is not as high as in private schools, due to factors such as limited funding. Because most students attend public schools, this creates an educational gap for some students, which can also contribute to Brazil’s income inequality. This is essential to consider, as the quality and level of education received can significantly affect the country's productivity.

Furthermore, Brazil has struggled with corruption in various forms, such as bribery and embezzlement. The Corruption Perceptions Index shows that Brazil scored 34/100 and ranked 107th out of 180 countries in 2024 (Transparency International, 2025), which indicates that there is a high level of corruption in the country. This has economic and social implications, as it can lead to the misallocation of resources and other issues that can hinder economic growth. These and many other challenges can explain why Brazil is not classified as a developed country, at least to some extent.

Conclusion

In conclusion, Brazil has experienced development in many aspects of its economy, which has supported its growth as an emerging market. The shift towards services has enabled the service sector to significantly contribute to Brazil’s GDP, with many aspects of the sector, such as fintech, supporting its growth. The industrial sector remains a driver of Brazil’s growth, despite the shift towards services, with key activities such as manufacturing being essential to the country’s development. However, many key challenges remain that can hinder further development in Brazil, such as income inequality and corruption, which invite essential discussions on how to address them

Bibliography

Galileo (2025) ‘The Digital Revolution in the Brazilian Banking Industry: A Decade of Transformation’, Galileo, 19 May. Available at: https://galileo-ft.com/blog/digital-revolution-brazilian-banking-decade-transformation/ (Accessed: 27 December 2025).

IBGE (2025) ‘Per capita earnings hit record and inequalities fall to the lowest level since 2012’, Agência IBGE Notícias, 8 May. Available at: https://agenciadenoticias.ibge.gov.br/en/agencia-news/2184-news-agency/news/43324-rendimento-per-capita-e-recorde-e-desigualdades-caem-ao-menor-nivel-desde-2013 (Accessed: 29 December 2025).

Lloyds Bank (2025) Brazil: Economic and Political Overview. Available at: https://www.lloydsbanktrade.com/en/market-potential/brazil/economical-context (Accessed: 27 December 2025).

Transparency International (2025) Corruption Perceptions Index 2024. Available at: https://www.transparency.org/en/cpi/2024/index/bra (Accessed: 28 December 2025).

World Bank (2026) Industry (including construction), value added (% of GDP) – Brazil. Available at: https://data.worldbank.org/indicator/NV.IND.TOTL.ZS?locations=BR (Accessed: 2 January 2026).

World Bank (2026) Services, value added (% of GDP) – Brazil. Available at: https://data.worldbank.org/indicator/NV.SRV.TOTL.ZS?locations=BR (Accessed: 2 January 2026).