Brazil’s Political Crisis, Explained

Zack Beauchamp – Vox, 04/21/2016

Brazilian President Dilma Rousseff is in the midst of a stunning fall from grace.

In 2013, Rousseff had a roughly 80 percent approval rating. Today, it’s around 10 percent. Just this Sunday, one house of Brazil’s Congress voted to impeach her.

The story behind Rousseff’s collapse is extraordinary — but also a bit complicated. If you’re just learning about it, it might be a little bit difficult to parse why Rousseff is in so much trouble, and why this is all blowing up now.

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The Rot at the Heart of the Brazilian Economy

Christopher Sabatini – Foreign Policy, 02/10/2016

In late 2014, Brazil seemed on the verge of a meltdown. Its economy had grown a mere 0.1 percent that year, as its currency (the real) dropped like a stone and business confidence plummeted. In response, in November of that year Brazilian President Dilma Rousseff turned to a Chicago-trained technocrat — a common antidote among Latin American leaders. Domestic and international investors welcomed the appointment of Joaquim Levy, a former banker and fiscal hawk, to lead the finance ministry, but they acknowledged he would have his work cut out for him. If Levy hoped to enact the drastic fiscal cuts and structural reforms needed to fix the careening economy, he would have to first overcome the resistance of not only a fractious congress, but also many members of Rousseff’s leftist Partido dos Trabalhadores (PT) and her cabinet.

Success would ultimately elude Levy. In December 2015, he quit, handing the ministry over to Nelson Barbosa, another well-respected economist. But Barbosa lacks Levy’s credibility among investors. And the task before him has only become more unenviable. He will have to push through his predecessor’s stalled reforms, while turning around an economy that suffered a GDP contraction of 3.7 percent in 2015, staving off potential debt crisisstabilizing the real, and avoiding what analysts predict could become Brazil’s worst crisis since 1901.

The first step to fixing Brazil’s crisis will have to involve recognizing that the rot goes much deeper than it might seem. Brazil’s troubles began with the downturn in the global commodity markets, which once bolstered the country. But the roots of the malaise trace much farther, to a historically autarkic economic model, a political system hobbled and corrupted by party factionalism and localism, and a constitutional carnaval of guarantees for social rights and payouts.

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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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Rio Olympics Slims Down as Brazil’s Economic Crisis Bites

Andrew Downie – Reuters, 01/19/2016

The grandstands for watching rowing and beach volleyball at the Rio de Janeiro Olympics are to be reduced in size to cut spending as Brazil’s economic crisis hits home, Olympic officials said on Tuesday.

The number of volunteers has also been cut from around 70,000 to 50,000 and the total of cars slashed by 20 percent to 4,000 from an original estimate of 5,000, Rio 2016 spokesperson Mario Andrada told reporters.

The moves come after four months of negotiations between Brazilian organizers, the International Olympic Committee and federations from around the world over how best to trim spending and ensure that South America’s first Olympic Games do not go over budget.

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Brazil’s Bust is Worse Than We Thought

Patrick Gillespie – CNN Money, 01/19/2016

The International Monetary Fund sharply downgraded its economic forecast for Brazil Tuesday. It was by far the largest revision of all major countries, according to its World Economic Outlook.

Brazil fell deep into a self-inflicted recession last year — the longest downturn for the country since the 1930s. The IMF and other forecasters thought Brazil would still be in a recession this year, but it wouldn’t be as bad as 2015.


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Brazil’s Carnival Lovers Face Sobering Moment as Country Braces for Recession

Jonathan Watts – The Guardian, 01/12/2016

When it comes to mood making in Brazil, there are few institutions that can match the samba schools of Rio de Janeiro.

For a week each year at Carnival, they embody exuberance with a pulsating parade of spectacular floats, gyrating dancers and bateria throbbing with the rhythms of tamborims, chocalhos, surdos and drums.

But even these professionally upbeat performers are wondering how long the party can last as the country’s economy suffers what is forecast to be the deepest recession in more than a century.

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Brazil inflation reaches highest level in 13 years

Rogerio Jelmayer – The Wall Street Journal, 01/08/2016

Consumer price inflation in Brazil increased last year to the highest rate in 13 years, despite the country’s economic contraction, underscoring one of the main challenges facing Latin America’s largest economy.

Brazil’s consumer-price index, known as the IPCA, rose 10.67% last year, compared with an increase of 6.41% in 2014, the Brazilian Institute of Geography and Statistics, or IBGE, said Friday. In December, the IPCA increased 0.96%, compared with a rise of 1.01% in November.

The annual inflation rate reached its highest level since 2002, when it was 12.53%. This marked the fourth time that consumer prices surpassed the tolerance band set by the central bank under its inflation target regime, which has been in place since 1999.

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