3 revealing myths about Brazil’s crisis

Brian Winter – Vox, 05/11/2016

To many observers, Brazil appears one swarm of locusts short of a full-fledged Biblical plague. Whether it’s the off-again, on-again impeachment of President Dilma Rousseff, the country’s worst recession in 80 years (or maybe ever), the spread of the bizarre and frightening Zika virus, or its continued struggle with drug gangs and homicides, Brazil looks anything but ready to host the world at the Summer Olympics this August.

Without a doubt, it has been a terrible 2016 — and a huge letdown after Brazil’s economic boom of the 2000s, which helped it win the Olympics in the first place. But the particularly confusing nature of this crisis, paired with the convergence of the world’s media hordes on Rio de Janeiro, has also produced a truly epic amount of misinformation, stereotypes, and wishful thinking.

So, in the spirit of better understanding the Land of Samba and Surf (oops, a stereotype!), and trying to gauge where the political and economic crisis might be headed next, here are three common myths about Brazil’s current crisis. The myths themselves are revealing in what they say about the country’s image — among locals and rubbernecking visitors alike.

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Brazil heads for worst recession since 1901

David Biller – The Salk Lake Tribune, 1/5/2016

Brazil’s economy will contract more than previously forecast and is heading for the deepest recession since at least 1901 as economic activity and confidence sink amid a political crisis, a survey of analysts showed.

Latin America’s largest economy will shrink 2.95 percent this year, according to the weekly central bank poll of about 100 economists, versus a prior estimate of a 2.81 percent contraction.

Analysts lowered their 2016 growth forecast for 13 straight weeks and estimate the economy contracted 3.71 percent last year.

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IOC VP: Brazil economic crisis will inevitably affect games

AP, 12/9/2015

The political and economic turmoil in Brazil will “inevitably” affect next year’s Olympics in Rio de Janeiro, a senior IOC official said Wednesday, as Brazilian organizers declared that preparations remain fully on track for the games.

With the opening ceremony less than eight months away, Brazil is dealing with severe recession, impeachment proceedings against President Dilma Rousseff and a massive corruption scandal involving state-run oil company Petrobras.

“They have political and economic difficulties,” IOC vice president Craig Reedie said. “Inevitably, they will affect the games. There are challenges. I think they and we will have to get through it.”

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Brazil’s most costly soccer stadium may not host Olympic games

Anthony Boadle – Reuters, 10/27/2015

In the midst of Brazil’s deepening economic crisis, its cash-strapped capital may not have the money to fulfill a promise to host Olympic soccer games next year, leaving unused the most expensive stadium built for the 2014 World Cup.

The Rio 2016 organizing committee has given Brasilia until mid-November to sign a contract or be stripped of the seven games set to be held there next year, a spokesperson said.

Tickets for matches in Brasilia have already been on sale for months and it remains unclear how fans, many of whom may have bought flights and booked hotels, would be reimbursed.

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Last chance for Brazil’s Rousseff to save mandate: newspaper

Walter Brandimarte – Reuters, 9/13/2015

Brazilian President Dilma Rousseff has one last chance to stem a growing political and economic crisis before being forced to step down, one of the country’s leading daily newspapers said on Sunday.

In an unusual front-page editorial, Folha de S.Paulo said Rousseff needs to take “drastic measures” including additional spending cuts and tax hikes to make up for a 2016 budget gap that has cost Brazil its investment-grade rating from Standard & Poor’s.

Rousseff, a leftist who was re-elected by a thin margin in 2014, is facing impeachment calls as her government struggles with a deep economic recession and a massive corruption scandal at state-run oil company Petrobras that has implicated several of her political allies.

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A silver lining to Brazil’s troubles

Joe Nocera – The New York Times, 9/4/2015

Of all the BRICS, Brazil would seem, on the face of it, to be in the worst shape.

BRICS, of course, stands for Brazil, Russia, India, China and South Africa, a catchphrase that was meant to connect their rapidly growing economies. But that was then. Today, their economies are sluggish at best, and their prospects no longer seem so bright.

Everybody knows about China’s troubles: its falling stock market, its slowing economy and the amateurish attempts by the government to revive them, as if they should somehow snap to when the Communist Party gives an order.

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Auto sales plummet in Brazil, hamstringing key industry

Stan Lehman – The San Diego Union-Tribune, 6/15/2015

Plummeting auto sales in Brazil amid the nation’s worst economic crisis in a decade have battered the industry that makes up one-fourth of the country’s industrial gross domestic product and has led to widespread layoffs and mandatory leaves.

At least 6,000 workers in auto factories have been laid off since January, officials say, and another 20,000 put on furlough. Those add to thousands of jobs lost last year.

Additionally, Fenabrave, an association of auto dealers, said 250 of the country’s 8,000 dealerships have gone out of business this year, resulting in 12,000 lost jobs.

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Brazil’s economic difficulties are cyclical argues President Rousseff

Mercopress, 3/13/2015

“We’re going through a time of cyclical difficulties but we’re a country with a solid foundation,” the head of state said at the inauguration of a project to expand and modernize the Port of Rio de Janeiro.

Rousseff, who again refused to characterize Brazil’s current situation as a crisis, defended her austerity program in the face of criticism from the opposition and some government allies.

Brazil’s economy is stagnant and may contract 0.7% this year, according to the latest forecasts, while the country’s federal, state and local governments ended 2014 with a cumulative primary budget deficit (before interest payments) equivalent to 12.51 billion, putting public finances in the red for the first time since the current reporting methodology was adopted in 2001.

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Brazilian Real Declines to Nine-Year Low Amid Economic Weakness

Paula Sambo – Bloomberg, 12/15/2014

Brazil’s real fell to a nine-year low as a report indicated that Latin America’s largest economy unexpectedly contracted in October, adding to concern that President Dilma Rousseff will struggle to revive growth.

The currency slid 1.2 percent to 2.6872 per dollar at 4:24 p.m. in Sao Paulo, the weakest level on a closing basis since March 2005. Swap rates, a gauge of expectations for changes in borrowing costs, climbed 0.14 percentage point to 12.69 percent on the contract due in January 2017.

The real dropped as the central bank reported today that the seasonally adjusted economic index, a proxy for gross domestic product, fell 0.26 percent in October from a month earlier. That was worse than every estimate from 27 economists surveyed by Bloomberg, whose median forecast was for a 0.25 percent expansion. One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, remained the highest among 16 major currencies.

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Analysis: How debt woes brought Batista’s Brazil empire to the brink

Jeb Blount – Reuters, 06/25/2013

As Brazilian billionaire Eike Batista’s EBX industrial empire crumbles, it increasingly resembles his most visible accomplishment, the Port of Açu.

In other words, a pile of sand in the middle of a swamp.

To build the $2 billion iron ore and oil terminal, shipyard and industrial park 300 kilometers (190 miles) north of Rio de Janeiro, the world’s largest dredging ship cut through the beach and dug 13 kilometers (8 miles) of docks out of dune and marsh. To keep tenants dry, the sandy waste is being piled as much as 15 meters over the surrounding flood plain.

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