The largest contribution to growth in both countries had capital growth. 50,3 % of all economic growth in Brazil is dedicated to growth of capital, only 0,6 % to growth of labour and 49,1 % to total factor productivity. In Russia 62,5 % of total economic growth is dedicated to growth of capital, 0,1 % to labour growth and 38 % to total factor productivity (technology). The Brazilian growth is more technology driven than Russians, but they both still grow on capital accumulation.

3.3 Consumption side of GDP structure (expenditures)

GDP = Household consumption + Gross investments + Government consumption + Net export (Export - Import)

Y = C + I + G + NX

development economic export consumption

Graph 3: GDP structure in % by type of expenditures Russia (constant prices 2008)

Russian economy is mostly driven by household consumption (average 44,5 %) , which is growing form year 2004, when total convertibility of rule was introduced and Russia was declared as market economy and there was increase in wages and pensions too. The second most important growth driver is export (average 32,5 % of GDP). Export importance in Russian's GDP is stable over time. With large share of export in GDP Russian economy is exposed to international aggregate demand shocks, what caused also - 7,8 % growth in year 2009. Average value of government consumption is 19,8 %. The movement of Gross investments mimics the GDP movement. High economic growth increases expected revenues and optimistic investment environment. At time of the crisis the share of investments dropped by 9,2 percentage points. Investment share was on average 20,5 %, what is tuned with economic theory suggestion. Import is moving similarly to gross investments, because higher domestic income increases import and it's share in GDP, the opposite effect is visible in the time of economic crisis 2009, when import importance fall. Russia constantly experiences positive net export (current account surplus). Average share of import in GDP is 16,9 %.

For poor economic performance in year 2009 was responsible negative “growth” of investment, which was the third most important part of GDP in year 2008, for 41 %. Drop in import was 30,4 %. It is interesting that Russia hasn't increased government spending, it was decreased by - 0,6 %. Own calculations Russian Federatrion Federal State Statistics Service (ROSSTAT) The 2009 Anti-Crisis Programme amounted to approximately 2 trillion rubles (62.5 billion $) ILO G-20 Country briefs The russian federation's Response to the Crisis, http://www.ilo.org/public/libdoc/jobcrisis/download/g20_russia_countrybrief.pdf, april 2010, found in May 2012, but overall G compared to 2008 has decreased.

Graph 4: GDP structure in % by type of expenditures Brazil (constant prices 2005)

The most important component of GDP in Brazil is Household consumption, with an average value 61,5 %. Export on the other hand on average contributes 14,32 % to GDP. Both indicators show that Brazil is mostly closed economy, larger share of Brazil's production is consumed at home and they are using their huge domestic market to sell their products. Net export was positive till 2008, than it became negative and it is getting larger (current account deficit). Before the crisis global economic forces have served Brazil well. As a leading exporter of raw materials (soya and iron ore), Brazil has benefited from Chinese boom. Export served for massive inflow of dollars and made real more expensive, what undermines competitiveness of manufacturing. Imported machinery has increased its market share from 15 % to 50 % since 2006. Chetwynd, G. (2011, August). Brazil's strong currency bnefits consumers but punishes business. The Gaurdian, Rio de Janeiro, found in May 2012 on website: guardian.co.uk . This movement is showed in negative net export.

The second most important component of GDP are gross investments (on average 19,72 %). Investment's share reaches maximum value in 2008 (20,8 %). Investments are going to increase due to Olympic Games in Rio de Janeiro in 2016. Government consumption share is on average 19,2 % and is relative stable over time.

In period form 2008 and 2009 Brazil experienced negative economic growth - 0,6 %. This was mostly due to decrease in gross investments (-16,2 %) and drop in export ( - 10,2 %). Public consumption has increased by 4,2 %. Stimulus package amounted to a 20,4 billion $ injection into the economy (1,2 % GDP in 2009) was part of contra cyclical policy. It impacted economic activity through additional government spending (3,9 % increase), tax cuts and subsidies. They created nominal deficit estimated at 3.2 per cent of GDP in 2009. Cunha, A., Prates, D., & Filho, F. (2011). Brazil Responses to the International Financial Crisis: A Successful Example of Keynesian Policies? PANOECONOMICUS, 2011, 5, Special Issue, pp. 693-714.

3.4 Export structure

Graph 5 Export Brazil by category in US $ (2000, 2009)

Note: Selected classification: SITC Rev.3: 0 (Food and live animals), 1 Beverages and tobacco, 2 (Crude materials, inedible, except fuels), 3 (Mineral fuels, lubricants and related materials), 4 Animal and vegetable oils, fats and waxes, 5 (Chemicals and related products), 6 (Manufactured goods), 7 (Machinery and transport equipment), 8 (Miscellaneous manufactured articles), 9 (Other)

Brazil export represents 14,32 % of GDP on average in years 2003-2010. The total export more than doubled in 9 years. All selected commodities export have increased from year 2003 till 2010. The largest jumps in export experienced commodities: Food and live animals, Mineral fuels and Crude materials export (form almost 0 value to fifth most important export commodity); on the other hand the smallest increase in export experienced: Manufactured goods, Chemicals and related products and Machinery and transport equipment. Other four commodities groups are not very important for Brazil.

Graph 6:Brazilian export of primary and manufactured goods and % of Brazilian export to China (2000-2011)

Brazil's export earnings from manufactured goods continue to fall while those from primary goods continue to rise. In year 2009 export earnings from primary goods has taken over manufacturing goods earnings. Despite of political struggle to support manufactured goods export, they failed to do so. More than half of the $33bn year-on-year increase in Brazilian exports in the first three quarters of 2010 came from primary products. This was mainly driven by a sharp rise in the value of exports of iron ore and crude oil, which almost doubled from the same period last year. The main reason for this change is China, which became Brazil's largest trading partner, overtaking the US. Iron ore is now the biggest Brazilian export product (17 % of total export, more than half goes to China). Analysts say Brazil must decide soon whether it is happy to be an exporter of low value-added goods or whether it wants to compete in markets for higher value goods. Romei, V., Wheatley, J.(2010, 1. November). Chart of the week: Brazil's shifting export structure Beyondbrics, found in May 2012, on website: http://blogs.ft.com/beyond-brics/2010/11/01/chart-of-the-week/#axzz1uJFNpQ00

Graph 7: Russian export

Note: A: food, raw materials except petroleum and gas; B: Crude materials, inedible, except fuels; C: Petroleum; D: Gas; E: Manufactured goods without steel and iron; F: steel and iron; G: Other

Russian export tippled in nine years. The most important Russian export commodities are represented in graph. The leading export commodity is fuel, followed by gas. Mineral fuels, lubricants and related materials export has increased the most, from 13 % of total export in 2000 to 46 % in 2009. The largest share of this increase goes to petroleum and gas export. In 2009 chemicals and related products, manufactured goods, machinery and transport equipment and miscellaneous manufactured articles represented 13,5 % of total export. Data suggest that Russian export is very dependent on primary goods export. Politics is trying to avoid all negative impacts of resource based economy, including Dutch disease, but they are not successful in diversifying Russian's economy. They are struggling to make their oligarchs owned industry more efficient, but distortions are too large.

4. Concluding comparison

Brazil and Russian Federation are both middle income countries. They have gained international interest in 2002 when they were declared as members of BRIC countries, who have chance to become world's leaders in the future or at least play more visible role in world order.

Differences in economic development indicators are most visible in population movement. When Brazil experiences high population growth Russian Federation grew at negative rate, which can in longer turn mean obstacle to growth. Income inequality is higher in Brazil, but is becoming lower, when in Russia the opposite is true. Brazil ranked 58 and Russia 63 with concern to global competitiveness index 2010-11. Brazil is doing much better fighting inflation than Russia, but Brazil experiences lower GDP growth rates. Russia has actually no public debt, with just 5,9 % GDP debt (due to oil revenues), Brazilian public debt is 60,8 % and they managed to lower it 2,3 percentage points in ten years.

Russian GDP per capita (PPP, constant prices) more than doubled in ten years (2000 to 2010), Brazilian increased almost by one third. Brazil experienced on average 3,14 % economic growth (1997-2010), Russia 4,42%. Both countries were hit by economic financial crisis 2009, but their economies were prepared. Brazilian growth in 2009 was - 0,644 % and year later already 4,03 %. Russian economy was hit harder, because they are more open than Brazil and due to drop in oil demand, what caused - 7,8 % growth in 2009, but she was back on track next year with 4 % growth.

Gross value added by economic activity is very similar between observed countries; this is due to similar economical development. The most important value added activity is for both: mining, manufacturing and utilities. 49 % of total industrial value added in Russia is dedicated to fuel, what shows on resource based growth. Supply side economic growth analysis has shown, that 50,3 % of whole economic growth in Brazil is dedicated to growth in capital (62,5 % in Russia), only 0,6 % to growth in labour (0,1 % in Russia) and 49,1 % to technology growth (38 % in Russia). The most important part of GDP in both countries is household consumption (61,5 % Brazil and 44,5 % Russia). Government spending, gross investments and import share are similar, but major difference is made in export. Russian's export share in GDP is 32,5 %, when Brazilian's is just 14,32 %. Between middle income countries Russia is unusually open and connected to other world, but they are still not WTO members. During the crisis the decline in output in both countries is due to fall of gross investment ( - 41 % RUS and - 10,2 % BRA).

Total Brazilian export more than doubled and Russian export more than tripled from 2000 till 2009. Russian export is mostly based on petroleum and gas. Brazilian export is more diversified, but major changes happened in 2009 when revenues from primary goods export overtook manufactured goods export earnings. Especially export of iron ore (17 % of total export) increased. Brazilian number one trading partner is China. In the future observed countries can become more similar, with taking into concern oil foundlings in Brazil.

References

2. United Nations, Commodity Trade Statistics Database (COMTRADE)

3. Chetwynd, G. (2011, August). Brazil's strong currency bnefits consumers but punishes business. The Gaurdian, Rio de Janeiro, found in May 2012 on website: guardian.co.uk

4. Cunha, A., Prates, D., & Filho, F. (2011). Brazil Responses to the International Financial Crisis: A Successful Example of Keynesian Policies? PANOECONOMICUS, 2011, 5, Special Issue, pp. 693-714.

5. Russian Federatrion Federal State Statistics Service (ROSSTAT)

6. Instituto Brasileiro de Geografia e Estatistica

7. Banco Central do Brasil

8. ILO G-20 Country briefs The russian federation's Response to the Crisis, http://www.ilo.org/public/libdoc/jobcrisis/download/g20_russia_countrybrief.pdf, april 2010, found in May 2012

9. A pathifinder report found in May 2012 on http:// www.pathfinderinternational.net/images/uploads/Brazil2.pdf

10. Ahrend, R. (2006). How to sustain growth in a resource based economy? The main concepts and their application to the Russian case, Economic department working papers No. 478, OECD.

11. Jones, C. (1998).Introduction to economic growth. New York.: W.W.Norton & Company, Inc.

12. Kvintradze, E. (2010). Russia's Output Collapse and Recovery: Evidence from the Post-Soviet Transition, IMF working paper, found in May 2012 on: http://www.imf.org/external/pubs/ft/wp/2010/wp1089.pdf

13. From miracle to Disaster: The Brazilian economy in last three decades, found in May 2012 on website: http://www.degit.ifw-kiel.de/papers/degit_10/C010_009.pdf

14. Roett, R. (2010).New Brazil. Washington D.C.: The brookings institution.

15. Brazil oil discoveries brings new challenges, found on May 2012 on http://www.frbatlanta.org/documents/pubs/econsouth/11q1_brazil_oil.pdf

16. Sakwa, R. (2008).Putin, Russia's choice (2.th edition). New York.: Routledge.

17. World Bank database

18. Wikiposit, found on: http://wikiposit.org/am?WB.RUS.SI.POV.GINI=95&WB.BRA.SI.POV.GINI=13

19. WEF Global Competitiveness Report 2010-2011

20. Nation master statistics, found on: http://www.nationmaster.com/graph/eco_pub_deb-economy-public-

21. IndexMundi found in May 2012 on website: http://www.indexmundi.com

22. http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

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