The Heat: Brazil at a Crossroads

Paulo Sotero, Lucrecia Franco,  Ligia Maura Costa, Bernardo Sork, Fabio Ostermann – CCTV, 01/28/2016

Political upheaval, economic downturn and corruption scandals: Brazil is at a crossroads.

So, what’s the way forward for a Latin American giant in crisis? 2015 was not Brazil’s easiest year. Several widespread protests across the country called for change. Confidence in president Dilma Rousseff reached a record low. A scandal at state-run oil conglomerate Petrobras exposed corruption. All while the economy stagnated and began a free fall. 2016 hasn’t started off much better either. For a Brazilian perspective, from Rio de Janeiro, The Heat was joined by CCTV America’s Lucrecia Franco. To discuss the current political and economic climate: Ligia Maura Costa is a professor of legal studies at Escola de Administração de Empresas de São Paulo. Bernardo Sorj is a professor of Sociology at the Federal University of Rio de Janeiro. To discuss Brazil’s future and the youth movement: Fabio Ostermann is one of the founders and a former coordinator of Movimento Brasil Livre. Paulo Sotero is director of the Brazil Institute of the Woodrow Wilson International Center for Scholars.

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Rousseff Poised to Win on Impeachment, Lose on Brazilian Economy

Arnaldo Galvao – Bloomberg Business, 02/01/2016

Embattled Brazilian President Dilma Rousseff may get a new lease on political life when legislators return to work Tuesday to discuss impeachment proceedings against her. Just don’t expect much help from them on the economy.

Following a six-week recess, much of the fervor surrounding the political crisis has died down, and with it the drive to oust Rousseff. Yet with consumers and businesses battered by a deepening recession, legislators have little appetite for the spending cuts and tax hikes administration officials say are needed to restore investor confidence. That’s especially true ahead of municipal elections in October, party leaders and political analysts said in interviews.

The mood could still sour against Rousseff and upset her chances to stay in office if discord increases within the ruling coalition, unemployment surges or the corruption probe that has rattled Congress expands further. But even the politician who stands to benefit the most from the president’s ouster, Vice President Michel Temer, says the mood in Congress has shifted away from ousting Rousseff, according to the G1 news site

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Brazil’s Real Weakens After Central Bank Abandons Rate Increase

Paula Sambo – Bloomberg Business, 01/21/2016

Brazil’s real sank to a four-month low and traders priced in faster inflation after the central bank surprised economists by keeping interest rates unchanged even with consumer-price increases running at more than twice the target.

Policy makers said in a statement accompanying Wednesday’s decision that the global economic outlook was increasingly uncertain, signaling they’re prioritizing economic growth over taming consumer-price increases. Central bank President Alexandre Tombini, in an unusual statement released Tuesday, said he would take into account the International Monetary Fund’s forecast for a deeper recession in Brazil this year.

While forecasts for Brazil’s deepest and longest recession in more than a century could justify a decision to keep interest rates unchanged, the central bank didn’t communicate its strategy clearly in the weeks leading up to the meeting, said Nicholas Spiro, a London-based managing director at Spiro Sovereign Strategy. The decision to hold interest rates at 14.25 percent, when most economists expected an increase, stokes concern that it’s susceptible to political influence.

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Brazil Recession Deepening With Three Lost Years, IMF Says

David Biller – Bloomberg Business, 01/19/2016

Brazil won’t return to growth until at least 2018 after two years of recession and one of stagnation, marking the first time in over a century that Latin America’s largest economy fails to expand for that long, the International Monetary Fund said.

The IMF cut Brazil’s 2017 economic forecast to stagnation from 2.3 percent growth as it updated its World Economic Outlook, last published in October. Gross domestic product will shrink 3.5 percent this year after contracting 3.8 percent in 2015, it said Tuesday. That would be the first time since 1901 that Brazil has back-to-back recessions deeper than 3 percent, according to data from the government’s economic research institute, known as IPEA.

The estimates mean the Washington-based lender is now more pessimistic than all but four of the 23 economists surveyed by Bloomberg, whose median estimate is for Brazil to expand 1 percent next year.

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Brazil’s New Finance Minister Aims to Shrink Swollen Budget

Paulo Trevisani – The Wall Street Journal, 01/18/2016

Brazil’s economy is mired in recession and beset by high inflation, and the remedy to both ailments is to shrink the country’s swollen budget, Finance MinisterNelson Barbosa said Monday.

Once Brazil improves its fiscal situation, after years of dismal performances, investment will increase, inflation will slow and economic growth will resume, he told reporters hours before leaving for the World Economic Forum in Davos, Switzerland.

The minister acknowledged, however, that fiscal improvement depends a lot on Congress, which has been hostile to President Dilma Rousseff’s administration since she won re-election in 2014.

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Brazil Oil Giant Petrobras Cuts Production, Spending Outlook; Shares Hit 12-Year Low

Aditya Kondalamahanty – International Business Times, 01/13/2016

Brazil’s largest oil company, Petróleo Brasileiro S.A., reduced its production outlook till 2019 as the state-run oil producer made deeper cuts to its budget amid an extended decline in oil prices and a massive domestic corruption scandal. Shares of the company fell 9.2 percent to a 12-year low following the announcement Tuesday.

Commonly referred to as Petrobras, the company slashed its investment plan for the five years through 2019 to $98.4 billion, down about 25 percent from its original budget of $130 billion announced last year. The company still plans to divest assets worth $14.4 billion this year to fund expansion plans, according to the statement.

Production target for 2020 was reduced 3.6 percent to 2.7 million barrels a day, Petrobras said in a filing. The company also said it expected Brent crude oil price — a benchmark for global oil prices — to average at $45 per barrel in 2016.

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Brazil’s Petrobras Slashes Investment Budget for Second Time

Paul Kiernan, Rogerio Jelmayer – The Wall Street Journal, 01/12/2016

Brazilian state-run oil company Petróleo Brasileiro SA, or Petrobras, trimmed its production targets and drastically cut its investment budget for the coming years after its sanguine projections for oil prices and exchange rates didn’t pan out and as it struggles to sell assets.

Petrobras said Tuesday it will invest $98.4 billion in the 2015-19 period, down from a June projection of $130.3 billion. The company reduced its targets for oil production in Brazil by 40,000 barrels a day in 2016 and 100,000 barrels a day in 2020.

The latest figures mark the second time Petrobras has had to revise its 2015-19 business plan. The company tweaked its spending outlook in October after oil prices and the real promptly fell below its original projections.

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