As Brazil’s economy goes in reverse, illusion of prosperity fades with it

Lourdes Garcia-Navarro – NPR, 7/27/2015

Only a few years ago Brazil was being celebrated for raising millions of people out of abject poverty. Now there are worries those gains may be at risk. The economy is shedding jobs and heading into recession. To explore this, NPR’s Lourdes Garcia-Navarro traveled to the economic hub of Brazil, the city of Sao Paulo.

LOURDES GARCIA-NAVARRO, BYLINE: A TV is not just a TV, at least not for 31-year-old Daniele Dos Reis. Hers is a 32-inch plasma – nice, but nothing extraordinary – but for her…

DANIELE DOS REIS: (Foreign language spoken).

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Brazilian prosecutors take step closer to political elite

Joe Leahy and Aline Rocha – Financial Times, 7/27/2015

Luiz Inácio Lula da Silva, Brazil’s firebrand former president, told a weekend meeting of trade unionists that the country’s political left was suffering from “persecution”.

Unnamed “elitists” were jealous of the achievements of his left-leaning ruling Workers’ party (PT) in raising the living standards of the poor, he said.

“What we see on the television looks like the Nazis criminalising the Jewish people,” he said. Mr Lula da Silva was right about one thing — the PT-led ruling coalition is under pressure as never before. But rather than Nazis, the “persecutors” are Brazil’s increasingly proactive and independent federal police, public prosecutors and judges.

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Reasons Against Impeachment

Roberto Pompeu de Toledo, Veja Magazine, 7/22/2015

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1. Let’s not rock too much the ship “Brazil”. Elections held at regular intervals and terms in office that are interrupted only in exceptional circumstances are the marks of a mature and solid democracy. Frequent interruptions of mandate characterize immature, unstable republics. If President Dilma is removed from office, she will be the second president impeached out of a total of four (Collor, FHC, Lula and Dilma) that Brazil has had since the end of the dictatorship, or fifty percent of the total. This mirrors the years of 1946-1964, when, during a fragile democracy, out of the four presidents elected in that period (Dutra, Getúlio, Juscelino and Jânio), two (Getúlio e Jânio) did not make it to the end of their presidential terms.

2. There are no signs of a political arrangement that could lead to a reasonably smooth presidential succession, such as the one that took place with Itamar Franco, when Collor was ousted. The opposition party PSDB, which has been competing for the presidency with the PT (Workers Party) for almost twenty years now, discredits itself as an alternative as it bets on a worsening of the situation as its best bet, as the PT used to do when it was in the opposition. For the PT, at the time, the tactics made sense, as it positioned itself against capitalism, and to a larger extent, against “formal democracy” or “bourgeois democracy.” The PT opposed the congressional election of Tancredo Neves for president in 1985 and the [adoption of a new] constitution in 1988. [In contrast], the PSDB supports the capitalist system and has contributed to the construction of the democratic institutions in place. Today, it is reneging on its own past by voting down the Social Security reforms it introduced, supporting fiscally irresponsible proposals in Congress, and in many situations joining the bandwagon of the unstable Speaker of the House, Eduardo Cunha.

3. The PT and the so-called “social movements”, having lost the streets to anti-Dilma demonstrations in recent months, will have the opportunity to gain them back by embodying the victim’s role. The PT appears now in the political horizon as the only visible beneficiary of Dilma’s fall. Retuning to the opposition would be a heaven’s sent opportunity to get rid of its current miserable embarrassment. PSDB’s Senator Aloysio Nunes Ferreira acknowledged this hypothesis in an interview to Bernardo Mello Franco, from Folha de S. Paulo: “Dilma’s impeachment may be ideal for Lula. The opposition becomes the government and Lula is free to become opposition and run as a candidate in the 2018 presidential elections.” If Lula today is already making disguised opposition to Dilma, one can only imagine the voracity with which he will do it without pretense. And it will be easy to be on the opposition, with the power equation unresolved and the economy in tatters.

4. Dilma’s legacy will be extremely heavy to whoever succeeds her. The economy, according to all predictions, will continue to falter for a good couple of years, as will the effects of the incompetent PT management of other sectors. If Dilma was responsible for the damage, it is up to her to undue it.

5. Last week, the threats of impeachment were confused with simple political revenge by politicians accused in Operation Carwash [as the corruption investigations of Petrobras scandal are known]. The search and seizure operations carried out by the Federal Police left politicians nervous and opened the way for accusations that the government would be behind the initiatives against senators and congressmen. The president of the Chamber [of Deputies], Eduardo Cunha, promised a difficult second semester for the president. An impeachment process led by Cunha, fed by his own motivations funneled by the questionable methods he has been employing in Congress, is more than the country can bear.

6. In lieu of the “crimes of responsibility” required by the Constitution as the basis for an impeachment process, so far we have seen only deceitfully empty charges. Presidents cannot be removed from office simply because they are bad or un-liked. On the matter of government accounting, that if rejected would eventually characterize a crime of responsibility, the Federal Accounting Tribunal (TCU) has been going back and forth, thus weakening its credibility. Now, the TCU itself embroiled in investigations involving two of its members – one of them the president of the institution.

7. The period following impeachment could be even more tumultuous then the current situation. Whatever the outcome may be, the country will enter a dark tunnel, with high risk for the rise of a government of scarce legitimacy that would, in turn, be promptly assailed. The radicalization observed in society will reach new heights. Instability will be the dominant note for a long period, maybe a fatally long one.

This article was originally featured in Veja. It was translated by Talita Franco, who is a Staff Assistant at the Woodrow Wilson Center for International Scholars as well as rising Senior at The School of International Service at American University. 

Economists reduce Brazil’s economic outlook for 2015, 2016

By Dow Jones Business News – 7/27/2015

Economists reduced their forecasts for Brazil’s economic performance once again, for this year and for 2016, as the country’s economy fails to regain traction.

Brazil’s gross domestic product is expected to contract 1.76% this year, compared with a contraction of 1.70% expected last week, according to a weekly central-bank survey of 100 economists.

For next year, economists reduced their view for an expansion of 0.20%, versus 0.33% projected in the prior week. The forecasts for both years marked the second consecutive downward revision by economists.

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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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Brazil’s real closes at weakest level in 12 years

Jeffrey T. Lewis – The Wall Street Journal, 7/24/2015

The Brazilian real closed at its weakest level in 12 years against the dollar on Friday, extending a slide that began on Wednesday, as concern about the government’s inability to get its budget and debt problems under control continues.

The real lost more than 1.7% Friday and exited active trading at 3.3488 to the dollar, according to Tullett Prebon via FactSet, after closing at 3.2904 on Thursday. The Brazilian currency hit 3.3570 during Friday’s session, and has weakened from 3.1699 at the close on Tuesday.

Brazilian Finance Minister Joaquim Levy announced Wednesday that the government is cutting key fiscal targets for this year, next year and 2017. The government’s target for its primary budget surplus, a measure of its ability to save, was slashed to 0.15% of gross domestic product for 2015, from 1.1%, and the targets for the next two years were also reduced.

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Brazil hopes to strengthen trade relations with Russia

Sputnik, 7/27/2015

Brazil wants its trade relations with Russia to strengthen and continue past the end of the Moscow-imposed ban on agricultural imports from Western countries that hit it with sanctions, Brazil’s Minister of Agriculture, Livestock and Supply Katia Abreu told Sputnik Brazil.

The European Union, the United States and their allies imposed several rounds of sanctions against Russia for its alleged involvement in the Ukrainian crisis in 2014. Moscow has repeatedly denied those claims, and, in August 2014, responded by imposing a year-long ban on certain food imports from the countries that imposed the economic restrictions.

In late June, Russian President Vladimir Putin signed a decree extending the countermeasures.

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