Brian Ellsworth – Reuters, 08/10/2016
Government employee Jose Lara this month used some vacation days to take a long scenic bus ride through the verdant plateaus and sweeping savannas of southern Venezuela, but the trip was anything but a holiday.
It was a 36-hour grocery run.
Lara took an overnight bus and then a pick-up truck to get across the border to neighboring Brazil to buy food staples that have gone scarce in Venezuela’s crisis-stricken economy.
Tyler Cowen – Bloomberg, 08/11/2016
Brazil, it is often and not quite fairly said, is the country of the future and always will be. As the Olympics focuses global attention on the country, it’s worth exploring the various ways in which this maxim is — and may not be — true.
The puzzle with Brazil is neither its successes nor its failures, but rather the combination of the two. The country has such a dynamic feel, and in the postwar era it saw many years of double-digit economic growth. The Economist featured the country on its cover in 2009 as the next miracle take-off, and in 2012 Germany’s Der Spiegel published a long article titled “How Good Governance Made Brazil a Model Nation.”
Yet Brazil never caught up to the developed world: Its gross domestic product per capita falls about 4 to 7 times short of the U.S. — about where it was more than a century ago. It is now experiencing one of the most severe depressions of any country in modern times. The president, Dilma Rousseff, is in the midst of an impeachment process. The combination of corrupt and violent police, muggings of athletes, polluted water and inadequate facilities have led many to wonder whether Brazil can pull of the Olympics without major embarrassment.
Olivia Arguinzoni- Americas Quarterly, 08/09/2016
New leadership atop Brazil’s massive national development bank is unwinding a decade of rampant lending that fed large conglomerates and strained the country’s finances.
Over the past half-century, Brazil’s Banco Nacional de Desenvolvimento Economico e Social (BNDES) built huge power plants and highways through the industrial southeast, aided social programs in the drought-ridden northeast, and helped create some of today’s world-leading companies like airplane-maker Embraer and pulp producer Fibria. More recently, it helped save the Rio Olympics with an emergency loan.
Such mega-investment projects played a central role in Brazil’s economy over the last ten years of Workers’ Party rule, during which former President Luiz Inácio Lula da Silva and suspended President Dilma Rousseff showed a particular penchant for state-sponsored development.
Andrew O’Reily – Fods News Latino, 08/02/2016
Seven years ago when Brazil’s then-President Luiz Inácio Lula da Silva announced that Rio de Janeiro would host the 2016 Summer Olympic Games on the city’s famed Copacabana beach, there was the feeling in the air that something momentous was about to happen in the South American nation.
Lula promised Brazilians that the Olympics and the 2014 World Cup would showcase the country as an emerging power on the world stage that could stand shoulder-to-shoulder with the likes of the United States, Western Europe and Russia.
For Brazil, he suggested that day in 2009, the sky was the limit.
Michale O’Boyle and Bruno Federowski – Reuters, 07/13/2016
Foreign investors in Latin America are warming to Brazil as a promising turnaround bet while souring on Mexico and its landmark energy reform that has yet to deliver.
Brazil has yet to recover from its worst recession in decades, inflation and interest rates remain among the highest in the region and it is saddled with a bloated public sector. In contrast, Mexico’s economy is growing at around 2 percent, has lower fiscal deficits and sounder public finances.
But while Brazil interim president Michel Temer’s reform agenda offers some promise, Mexico, once a darling of foreign investors, is now a source of disappointment. A slump in oil prices dashed hopes that President Enrique Pena Nieto’s energy sector opening in 2013 along with telecoms and banking reforms would boost foreign investment and supercharge growth while clouds are now gathering over its budget and economy.
Lise Alves – The Rio Times, 07/11/2016
SÃO PAULO, BRAZIL – If suspended president Dilma Rousseff is impeached from office in August, Brazil’s interim President, Michel Temer, plans to take his first official overseas trip as leader of the country in September to China, Industry and Foreign Trade Minister Marcos Pereira announced over the weekend. Temer’s main goal is to boost Brazilian exports to the Asian country, especially of aircrafts and beef.
Last year, during Chinese Prime Minister Li Keqiang’s visit to Brazil, the two countries signed investment agreements worth US$53.3 billion to be made by Chinese companies in Brazil in the areas of agribusiness, auto parts, equipment transport, energy, railways, highways, airports, ports, storage and services. Now Temer wants to increase the presence of Brazilian products in China.
Julia Leite & Paula Samba – Bloomberg, 06/27/2016
Brazil is winning over derivatives traders as Acting President Michel Temer seeks to repair the nation’s finances.
The cost to hedge against losses in Brazil’s bonds with credit-default swaps has tumbled by almost a third in the past six months, the biggest drop among the world’s major economies. Prices of the swaps are also now back to levels that prevailed before S&P Global Ratings cut the country’s rating to junk in September.
The turnaround is part of a rebound in Brazil’s financial assets this year fueled by the removal of President Dilma Rousseff from office while she faces an impeachment trial. Since taking the reins last month, Temer has proposed spending caps to help shrink a near-record budget deficit and struck a deal to ease a fiscal crisis roiling Brazilian states amid the longest recession in more than a century.
Brian Winter – Americas Quarterly, 06/22/2016
It’s been yet another rough week for Brazil’s international image, with an Olympic mascot shot dead in an absurd accident and another national political figure dragged into scandal. But the biggest blow of all came from Declan Ryan, co-founder of the Irish budget airline Ryanair, who told an Argentine newspaper that he was considering expansion into every South American country “except for Brazil, where there is lots of corruption.”
This is precisely the wrong lesson to draw from Brazil’s struggles – akin to believing that the house that gets the most exhaustive inspection must also be the most rotten one on the block. It’s telling that Ryan made his comments (which became huge news in Brazil) while announcing an expansion into Argentina, where the corruption under 12 years of Kirchner rule is only now coming to light. Just last week, a former Argentine secretary of public works was arrested while trying to hide $9 million in cash in a monastery. Ryan preferred tolaugh that story off.
As regular AQ readers know, the negative headlines about Brazil result from a positive process – the independent prosecutors who have uncovered evidence of systemic graft and fraud, and sent some of the country’s most powerful people to jail. This does not mean Brazil is South America’s most corrupt country – it may mean, instead, that it has its healthiest (or most active) legal system. But the mistake Ryan made is surprisingly common, and it provides a golden opportunity for investors who are savvy enough to see the truth.
Luisa Leme – AS/COA, 06/17/2016
It’s just over a month since Brazil’s Senate suspended Dilma Rousseff for 180 days to hold an impeachment trial. Since then, the government of interim President Michel Temer has chosen a path that focuses on cutting spending on social policies to improve the country’s fiscal situation in the hopes of recovering investors’ trust. Temer took office May 12 and introduced an economic team led by Finance Minister Henrique Meirelles, who promised to “save the country” from its crisis while preserving Brazilian institutions and anticorruption efforts.
But many of the interim government’s decisions have been met with a backlash from voters, the judiciary, and even its own team. Temer not only picked an all-male cabinet, but 15 of the 26 ministers he selected face criminal investigations, with nine of them linked to the Lava Jato corruption scandal.
On top of that, two ministers had to leave their posts afterleaked recordings revealed they planned to use the impeachment process to halt corruption investigations, while the tourism minister resigned today due to links to Lava Jato. Temer himself was also linked to Lava Jato after the former president of the state-run oil transportation company Transpetro accused him of asking for kickbacksfor a mayoral candidate of Temer’s Brazilian Democratic Movement Party (PMDB). The São Paulo electoral court declared Temer ineligible for future office, based on the country’s clean record law, as he was convicted of exceeding donation limits for political campaigns.
Alonso Soto and Maria Carolina Marcello – Reuters, 06/15/2016
Brazil’s interim President Michel Temer proposed on Wednesday a constitutional amendment to limit public spending growth for up to 20 years, one of the most far-reaching fiscal reforms in decades designed to curb a runaway rise in public debt.
Brazil’s government, including the legislative and judiciary branches, will be obliged to limit annual spending growth to the inflation rate of the prior year if the flagship reform is approved in Congress, according to a Finance Ministry statement.
The move signaled a victory for economic hardliners in the cabinet, led by Finance Minister Henrique Meirelles, who overcame calls from a faction pushing for a shorter cap.