Registration / Login
text version
War and Peace

 Hot news

Touring the Backyard: Putin Pays Central Asia a Visit
Donbass blockade is finishing off Poroshenko and Akhmetov
If US throws Ukraine under the bus, will Moscow reciprocate?
Military Situation Remains Tense In Eastern Ukraine
Main page » News » View
Printable version
Brazils recession to deepen in 2016
20.12.15 12:00 Americas on the move
Brazil is facing a perfect storm of bad economic and political developments which threaten to make 2016 one of the hardest periods the country has faced in decades.

On Friday, the Banco Central do Brasil (BACEN) released its economic activity index – a measure of productivity in the farming, industry and services sectors, which showed that there had been a 0.63 decline in October from the previous month.

Year on year, activity has falled by 6.38 per cent.

The sharper-than-expected decline was only the latest volley of bad economic data to add to the government’s fiscal woes.

While President Dilma Roosseff remains steadfast against calls for her impeachment on suspected corruption, the biggest challenge to her political career remains Brazil’s economic health.

This week was particularly bad for her cabinet as the economy appeared to continue its downward spiral.

Brazil’s economy is in a “deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty,” the global ratings agency Fitch said as it downgraded the country’s debt to junk status or BB+ with a negative outlook.

(In September, the Standard & Poor’s rating agency cut Brazil’s rating to junk.)

The rating downgrades chip at Roussef’s – and Brazil’s – credibility and marketability abroad.

Her trip to the US in July was largely to encourage international businesses to “take advantage of the business and investment opportunities that are emerging in Brazil, especially in infrastructure” she earlier said.

Oil and the Fed

Brazil is the world’s 12th largest oil producer, an aspect that has helped the country’s $2.2 trillion economy become the largest in Latin America.

When oil prices were at least around $110 a barrel, Brazil – and other emerging oil-exporting economies – was the darling of foreign investors.

In 2013, Brazil’s GDP was expected to reach 2.13 per cent; inflation was around 5.8 per cent; interest rates were around 9.25 per cent and the trade surplus was at $6 billion.

But then two things happened: First, the US Federal Reserve terminated its six-year bond-buying stimulus program in 2014.

Extra cash which had been available because of this program and which had been injected into foreign markets suddenly reveresed direction and headed back to the US.

Simultaneously, oil prices fell to around $80 a barrel.

By 2014, the picture was drastically reversed: Industrial output, including in the automotive sector, plummeted; inflation rose to 6.3 per cent; interest rates jumped to nearly 11 per cent and economic growth was under 1 per cent.

2015 was an even worse year. Inflation was practically out of control hitting 8.47 per cent in April. Brazil’s Central Bank has struggled for years to bring it down to a healthy level of 4.5 per cent.

Unemployment increased from 4.7 per cent in July 2014 to 6.7 per cent in April 2015. By October, the jobless rate stood at 7.9 per cent.

(It unexpectedly fell to 7.5 per cent in November)

The benchmark SELIC interest rate was raised to over 13 per cent in April 2015 and by July had risen again to 14.25 per cent, the highest in nine years.

BACEN has kept the rate steady since then.

Still, oil and the Fed

But in December, the economic vulnerabilities of oil-exporting emerging markets such as Brazil became acute when oil prices fell below $36 a barrel.

The Fed’s decision on Wednesday to raise interest rates for the first time in a decade by a measured 0.25 per cent means that there is likely to be more capital outflow from emerging markets like Brazil.

Given the double whammy of low oil prices and incresed capital outflow, Brazil’s recession is expected to become worse and, many analysts say, go well into late 2016 – or beyond.

Government statistics agency IBGE said in early December that the Brazilian economy contracted 1.7 per cent in the third quarter of the year over the previous quarter.

In the first nine months, the economy contracted 3.2 per cent compared with the same period in 2014.

Year on year, gross domestic product (GDP) fell 4.5 in the third quarter, said the.

Economists say that growth in 2015 will have contracted by 3.3 per cent. They predict a 3.5 per cent contraction in 2016.

By Firas Al-Atraqchi for The BRICS Post with inputs from Agencies

 Orphus: ORPS


 Exclusiveread more rss

» Addition by Subtraction, (x, y)↦x−y
» Too Little, Too Late, will there be a Romanov ending for the Sudairi Seven?
» Week 21: When economic arguments end, the arms race begins
» Is Germany losing yet another world war?
» The Islamic State (ISIS) is Made in America: The Pentagon had Planned the Fall of Mosul and Ramadi in 2012
» Has Merkel Been Abandoned?
» The Islamic State and Chaos in the Greater Middle East
» Council on Foreign Relations Grand Strategy: China Must Be Defeated, The TPP Is Essential to Undermining China

 Newsread more rss

» Integrating the Army Into the US Approach to the Pacific
» Russian jets mistakenly bomb US-backed forces in Syria
» Touring the Backyard: Putin Pays Central Asia a Visit
» ISIS Changes Format of War in Iraq Using Partisan Methods
» Great Wall of the EU: China at the gates
» Donbass blockade is finishing off Poroshenko and Akhmetov
» Israel targeted under law passed to help 9/11 families sue Saudis
» Morocco threatens to cut EU ties if farm deal flounders

 Reportsread more rss

» The Cowardice of Aung San Suu Kyi
» EU Steps Up The Pace For Cashless Society In 2017/18
» Islamic States Khorasan Province, 2 Years on
» Can Afghanistans Economy Rebound in 2017?
» Trump triumphed due to downward mobility
» Americas Secret African Drone War Against the Islamic State
» Putin Goes Ballistic In Syria, Obliterates The USAs Secret Mideast Strategy
» Grassroots Fascism: The War Experience of the Japanese People

 Commentariesread more rss

» Nations align in the fight for Syrian peace
» Moscows wriggle room shrinking vis-à-vis Trump
» The $2 Trillion Gamble That Saudi Arabia Cannot Win
» Frances election in total chaos for the mainstream
» If US throws Ukraine under the bus, will Moscow reciprocate?
» Russian Mercenaries In Syria And Around The World
» Did Bayer AG do a Sly Deal on Glyphosate with EU Commission?
» The road to democracy

 Analysisread more rss

» Redrawing the Middle East borders: conspirology or real plan?
» The bankers and the euro
» The cancer of bankers
» Will Trump Destroy the Euro?
» The magic of bankers
» Pakistan and China: Dont Fear Chabahar Port
» South Africas Opposition See Eye to Eye with Trump
» Rex Tillerson and the Myths, Lies and Oil Wars to Come
text version 2006-2017 Inca Group "War and Peace"