Brazil’s dire economy slides toward “junk” status by Márcio G. P. Garcia, Lucas Maynard and Rafael Fonseca published by Financial Times (8/2014).
The deterioration of the Brazilian economic situation in the last few months is quite impressive. Looking through a few of the recent economic indicators, the only ones that are pointing up are the ones that you would like to see going down: inflation, unemployment, delinquency rates, interest rate and public debt. Despite an economic policy U-turn in the second Dilma Roussef´s government, represented by the substitution of the heterodox Finance Minister Guido Mantega by the University of Chicago-trained Joaquim Levy and by the Brazilian Central Bank’s much tougher monetary policy stance, the government has not been able to contain a deterioration in the expectations. The confidence indicators are at their lowest level in history, indicating that not only is the situation dire, but also there is no likelihood of it getting any better in the short term. Levy tried to fix the deplorable state of the fiscal accounts, as well as to build the necessary conditions to make the economy grow again, but he was attacked by all sides, not only in the Legislative but also in the Executive. The bombardment of ministers that try to contain public spending is nothing new in Brazil. However, due to the aggravating current circumstances, this tradition promises to be particularly damaging.
