Until the mid-1970s, the Brazilian economy grew consistently at an annual rate of slightly over 6 per cent. At the beginning of the 1980s, economic conditions changed radically. Falling rates of investment led to a widespread recession, and a distorted price structure completely upset business expectations and disorganized national production.

A series of unsuccessful stabilization experiments distorted prices further and increased social inequalities. National economic problems had a significant impact on the urban system. During the boom, the major cities were expanding but industrial deconcentration in the hinterland of these cities led to the rapid growth of a number of secondary cities in the south and south-east of the country. During the 1980s, urban poverty increased markedly, both in the largest cities and in small cities based in backward agricultural regions or dependent upon consumer-goods industries.

With the recession, many small industrial companies simply vanished. Rio de Janeiro metropolitan area fared during the recession of the 1980s.

With around 10 million inhabitants, Rio's metropolitan area is Brazil's second largest city and its second most important port. It is located some 400 kilometers north of its greatest national rival, São Paulo. Together, these two cities contain over 25 million people and almost half of Brazil's manufacturing activity. They dominate the southeast, the most prosperous region in Brazil, and in recent years have maintained their combined share of the national population. In contrast to São Paulo, however, Rio's economic situation has been in decline for some years. Its economic future was damaged when the federal capital was moved to Brasília in 1960, along with a huge amount of public investment.

Rio has also suffered badly from the Brazilian economic recession and has been losing out in the struggle with São Paulo for commercial and industrial dominance. In 1985, São Paulo accounted for 26 per cent of the country's manufacturing production compared to Rio's share of 7 per cent. Many of Rio's leading banks, industries, and research and development companies either relocated or moved their headquarters to São Paulo.

Earnings from tourism also declined as the media drew international attention to Rio's escalating crime rate. As a result, an increasing gap opened up between the two largest metropolitan areas. Since 1970, the population of São Paulo has grown nearly twice as fast as that of Rio. In 1988, average household earnings per capita were 22 per cent higher in São Paulo than in Rio; in 1970 the difference had been only 10 per cent; in 1976, 18 per cent. This was not just a relative decline. As a result of the national recession, Rio's population became much poorer. Between 1976 and 1988 real earnings in Rio de Janeiro fell by 29 per cent.

Over the last thirty years, Brazil's urban population has grown at an average annual rate of just over 5 per cent. In the 1960s and early 1970s, the fastest rates of growth were recorded by cities with between 100,000 and 250,000 inhabitants. By the 1980s, although the economies of many of these secondary centers were continuing to prosper, their population growth rates slowed. The fastest urban growth rates were now to be found among the large metropolitan centers, particularly those in the northeast of the country. The pace of population growth slowed markedly in the 1980s, partly the result of a slowing of natural increase in Brazil as a whole and partly the result of economic recession. However, the falls in the growth rates of Rio de Janeiro and São Paulo were much more marked than those of the other cities. During the 1980s, Rio's population grew at 0.8 per cent per annum, São Paulo's at 1.7 per cent.

The population of the central city has been expanding less quickly than the periphery in every metropolitan area of Brazil. However, this process is much more advanced in Rio and São Paulo and is reflected in the large differential in those cities between the central and peripheral growth rates. Over the years, migration has been a significant factor in Rio's growth and, in 1980, migrants made up more than 40 per cent of the total population. Research has shown that 70 per cent of migrants to metropolitan centers in Brazil originate from urban areas. Most arrivals are first absorbed into either the construction industry or the service sector and eventually move to the suburbs. Most of these migrants were living in municipalities outside but relatively close to the central area: Nilópolis, São João de Meriti, Nova Iguaçu, São Gonçalo, and Caxias. More distant towns, such as Petrópolis, with its pleasant site in the mountains more than 80 kilometers from downtown Rio, its economic base centered upon tourism and fairly sophisticated, clean industries, and its reliance on skilled labor, attracted fewer migrants. Among recent migrants there has been a stronger tendency to move into municipalities on the eastern banks of Guanabara Bay, notably Itaborai (31%) and Magé (26%).

During the 1980s, Rio's population growth slowed right down. The decline is explained by Brazil's economic recession and the slowing of metropolitan growth throughout the country. Fewer migrants moved to the major cities, a trend particularly marked in Rio owing to the latter's especially serious economic problems. But the slower pace of growth was also due to longer-term demographic trends. Fertility rates plummeted in Rio between 1970 and 1988. And, while life expectancy increased, the rate of change was far less marked. As a result, there was a substantial fall in the rate of natural increase.