What Really Sank Brazil

Mary Anastasia O’Grady – Wall Street Journal, 12/13/2015

It’s easy to blame plummeting oil prices for the economic crisis in Brazil. It’s also wrong. Brazil’s wounds are self-inflicted by an antigrowth policy mix dating back to 2008. The results were predictable.

The Brazilian economy contracted a whopping 4.5% in the third quarter from a year earlier. The International Monetary Fund forecasts that for 2015 Brazil’s gross domestic product will shrink by 3% and another 1% in 2016. That follows flatline growth in 2014.

In September, Standard & Poor’s stripped the country of its investment-grade rating. On Wednesday Moody’s said that it is contemplating a similar downgrade of Brazil’s debt. The annual inflation rate at the end of November was 10.5% and CIBC Capital Markets forecasts a fiscal deficit this year of 10.5%.

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