The Miami Herald has reported how Brazil’s embattled president, Dilma Rousseff, is facing a perfect storm of problems to deal with, including:
- Inflation is running at nearly 10%.
- The budget deficit is soaring.
- The value of the real has fallen by 32%.
- Average wages are declining.
- Unemployment in Brazil’s six major metropolitan regions was 7.6% in September after years of almost full employment.
- In the first nine months of this year, 657,761 jobs were lost and 1.5 million jobs are expected to disappear from Brazil’s formal economy in 2015.
- Standard & Poor’s has downgraded Brazil’s credit rating to junk status while Fitch Ratings downgraded Brazil to BBB-, which places it at just a notch above junk.
- There are corruption investigations into both Petrobras, the state-run oil company, and the construction industry already have damaged investor confidence.
- Dozens of members of Congress are under investigation plus important corporate leaders have been jailed.
The article then quoted Joel Velasco, a senior vice president at Washington strategic advisory firm Albright Stonebridge Group, outlining four possible scenarios for Brazil:
- In the most unlikely scenario, the 2014 election could be declared void if it is found that the Rousseff ticket used bribes to finance the campaign. However, an investigation into 2014 campaign donations is still ongoing.
- Rousseff might be impeached if it is found she used accounting tricks to lessen the severity of budget deficits.
- Rousseff could quit, but she has said she has “never considered resigning.” Nevertheless, even respected former President Fernando Henrique Cardoso has suggested she resign or issue a frank apology for her mistakes.
- In the most likely scenario, Rousseff could muddle through and preside over a “government that is rudderless.” If that’s the case, Rousseff needs to build consensus and assemble a kitchen cabinet of experts regardless of political party.
To read the whole article, Brazil: How could so much go so wrong?, go to the website of the Miami Herald. In addition, visit our Brazil ETF list page.
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