Brazil Economy Update: Austerity Plan Alone Won’t Fix Recession, Analysts Say


Brazilian lawmakers are in a high-stakes tug-of-war over an austerity plan aimed at plugging a gaping hole in the budget that threatens a chain of ratings downgrades. The program announced this week is a last-ditch effort to restore some confidence in President Dilma Rousseff’s government, which has been pummeled by relentless bad economic news this year.

But analysts say austerity alone is not Brazil’s ticket out of a recession that’s been deepened by slowing Chinese demand for its exports. Business groups have long been calling for large-scale fixes to make it easier for companies to operate in Brazil, in the form of downsizing labyrinthine tax and outdated pension systems. With public faith in Rousseff at an all-time low, however, they say it may be too late for her to tackle the roots of Brazil’s economic crisis and pull it out of its gloom.

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