Brazil on the border of being junk again

Kenneth Rapoza – Forbes, 7/24/2015

The hole in Brazil’s economy keeps getting bigger. This was not the base case scenario of any of the economists I speak with regularly here at FORBES, but the mood is shifting. Brazil is in the quick sand now, and there are very little branches around to pull these guys out.

This Wednesday, the government — basically being led now by Finance Minister Joaquim Levy — announced big revisions to its primary surplus targets for 2015-17. Less money is flowing into the government’s coffers. Jobless claims are on the rise. Unemployment is nearly 7%. Even if Levy’s lower target was expected and had been widely discussed as a possibility, the sizes of the cuts were caught people off guard. For this, the iShares MSCI Brazil (EWZ) is down 9.3% since Wednesday compared to a 3.27% for the MSCI Emerging Markets Index. Brazil is the worst performing BRIC over the period and worst performer over the last 12 months. EWZ is down 44.8% in the period.

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