Brazil attorney general seeks investigation into political figures in big kickback scandal

March 4, 2015

US News/AP – Brad Brooks, 03/02/2015

Brazil’s attorney general on Tuesday asked the Supreme Court for permission to investigate 54 people, the majority top political figures, for alleged involvement in what prosecutors say is the country’s largest corruption scandal yet uncovered.

Attorney General Rodrigo Janot’s request opens an expansive new phase of the investigation into the kickback scheme at state-run oil company Petrobras.

“We’re going to work with tranquility, with balance. Those who must pay will pay,” Janot told supporters outside his office late Monday night. “We’re going to investigate. This will be a long process, we’re just now beginning. The investigation begins and we’ll follow it through to the end.”

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Study shows rise in purchasing power in Brazil’s shantytowns

March 3, 2015

EFE – Fox News Latino, 3/3/2015

Growth in median incomes and employment over the past few years has increased residents’ purchasing power in Brazil’s “favelas,” or shantytowns, a study by consulting firm Data Popular found.

The approximately 12.3 million people living in favelas across the country spent roughly 68.6 billion reais ($24 billion) in 2014. The increase in purchasing power has led to growth in discretionary spending, compared to the previous year.

Two telltale signs of this discretionary spending are purchases of plasma television sets and washing machines.

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5 reasons why the impeachment of Dilma is improbable, according to Brazilianists

March 3, 2015

Alessandra Corrêa – BBC Brasil, 3/2/2015

A series of problems confronted by President Dilma Rousseff in the start of her second mandate was already indicated by some as a signal of a threat to her government.

In response to the Financial Times blog post published last week on ten reasons why Dilma should be impeached, BBC Brasil offers five reasons why this likely will not happen. These reasons include the lack of solid grounds for impeachment and the absence of evidence proving the involvement of Dilma in the Petrobras scandal. Brazil Institute Fellow Matthew Taylor states, “Until now, there is still no evidence that Dilma is guilty of anything other than bad management (in the case of Petrobras).” Taylor also goes on to show why the opposition parties are not interested in having Dilma go through the impeachment process, observing, “I don’t think that the PSDB would have much to gain. Furthermore, they would need the support of the PMDB and other parties in the government’s coalition. And frankly, none of these parties would like to see Dilma suffering an impeachment.”

The article continues with evidence showing that Dilma’s support in congress is still much higher and stronger than that of former president Fernando Collor de Mello, who was impeached in 1992. Another reason for the unlikelihood of impeachment is that the current problems in Brazil are not rare for the region. Brazil is not alone in the lack of investor confidence and therefore unlikely to stand out by themselves by inciting an impeachment process. Taylor concludes by noting that the Petrobras scandal has left the country “warily optimistic.”

For full article [IN PORTUGUESE], click here.

Translation and summary by Brazil Institute intern Erica Kliment.


Brazil’s shock therapy against inflation

March 3, 2015

Silvio Cascione – Reuters, 3/3/2015

Brazil’s central bank’s two-day policy meeting kicks off later on Tuesday with all bets placed on a fourth straight interest rate increase, despite growing consensus that the country is headed for its worst economic recession in 25 years.

The benchmark interest rate, currently at an already-high 12.25 percent, is expected by the wide majority of 48 economists polled by Reuters to reach the highest in six years at 12.75 percent. Other increases are in the pipeline, and some say the Selic rate could climb to as much as 13.75 percent this year.

Monetary tightening is just one side of Brazil’s all-out war on price rises. Finance Minister Joaquim Levy, tasked by President Dilma Rousseff to plug a growing budget deficit, has already frozen dozens of billions of dollars in government spending, removing one of the major pressures over consumer prices in recent years.

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Brazil: 10 good reasons to think the two-month-old government will go

February 27, 2015

Jonathan Wheatley – Financial Times, 2/25/2015

So much is going wrong in Brazil that it is hard to keep up. For years, critics have accused the government of incompetence. Now its actions are looking catastrophic – so much so that there are good reasons to think President Dilma Rousseff, who began a second four-year term only on January 1, may not last much longer.

Here is our list of 10 things that threaten to bring her down.

1. Politics.
For a Brazilian president to be impeached, they must do something egregiously wrong. But many do that and survive. What really counts is losing support in Congress. Rousseff’s congressional majority was cut at the election while the number of parties in Congress increased, leaving her coalition more splintered and harder to control. Worse, large sections of her ruling Workers’ Party have turned against her. Some members regard her as a late-coming, opportunistic interloper. Some to the “right” of the party accuse her of messing up. Others to the left are furious at her appointment of the “neo-liberal” Joaquim Levy as finance minister last month.

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Brazil: In a quagmire

February 27, 2015

The Economist (print edition), 2/28/2015

CAMPAIGNING for a second term as Brazil’s president in an election last October, Dilma Rousseff painted a rosy picture of the world’s seventh-biggest economy. Full employment, rising wages and social benefits were threatened only by the nefarious neoliberal plans of her opponents, she claimed. Just two months into her new term, Brazilians are realising that they were sold a false prospectus.

Brazil’s economy is in a mess, with far bigger problems than the government will admit or investors seem to register. The torpid stagnation into which it fell in 2013 is becoming a full-blown—and probably prolonged—recession, as high inflation squeezes wages and consumers’ debt payments rise (see article). Investment, already down by 8% from a year ago, could fall much further. A vast corruption scandal at Petrobras, the state-controlled oil giant, has ensnared several of the country’s biggest construction firms and paralysed capital spending in swathes of the economy, at least until the prosecutors and auditors have done their work. The real has fallen by 30% against the dollar since May 2013: a necessary shift, but one that adds to the burden of the $40 billion in foreign debt owed by Brazilian companies that falls due this year.

Escaping this quagmire would be hard even with strong political leadership. Ms Rousseff, however, is weak. She won the election by the narrowest of margins. Already, her political base is crumbling. According to Datafolha, a pollster, her approval rating fell from 42% in December to 23% this month. She has been hurt both by the deteriorating economy and by the Petrobras scandal, which involves allegations of kickbacks of at least $1 billion, funnelled to politicians in her Workers’ Party (PT) and its coalition partners. For much of the relevant period Ms Rousseff chaired Petrobras’s board. If Brazil is to salvage some benefits from her second term, then she needs to take the country in an entirely new direction.

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Schumpeter: Brazil’s business Belindia

February 26, 2015

The Economist (print edition), 2/28/2015

BRAZILIANS make up almost 3% of the planet’s population and produce about 3% of its output. Yet of the firms in Fortune magazine’s 2014 “Global 500” ranking of the biggest companies by revenue only seven, or 1.4%, were from Brazil, down from eight in 2013. And on Forbes’s list of the 2,000 most highly valued firms worldwide just 25, or 1.3%, were Brazilian. The country’s biggest corporate “star”, Petrobras, is mired in scandals, its debt downgraded to junk status. In 1974 Edmar Bacha, an economist, described its economy as “Belindia”, a Belgium-sized island of prosperity in a sea of India-like poverty. Since then Brazil has done far better than India in alleviating poverty, but in business terms it still has a Belindia problem: a handful of world-class enterprises in a sea of poorly run ones.

Brazilian businesses face a litany of obstacles: bureaucracy, complex tax rules, shoddy infrastructure and a shortage of skilled workers—to say nothing of a stagnant economy (see article). But a big reason for Brazilian firms’ underperformance is less well rehearsed: poor management. Since 2004 John van Reenen of the London School of Economics and his colleagues have surveyed 11,300 midsized firms in 34 countries, grading them on a five-point scale based on how well they monitor their operations, set targets and reward performance. Brazilian firms’ average score, at 2.7, is similar to that of China’s and a bit above that of India’s. But Brazil ranks below Chile (2.8) and Mexico (2.9); America leads the pack with 3.3. The best Brazilian firms score as well as the best American ones, but its long tail of badly run ones is fatter.

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