We just got news that Brazil faces very serious economic troubles. I guess that we will find out very soon what happens when the largest economy of Latin America hits the wall. Brazil is one economy that could drag down a lot others in the region.
This is from Bloomberg:
Brazil’s economy will contract more than previously forecast and is heading for the deepest recession since at least 1901 as economic activity and confidence sink amid a political crisis, a survey of analysts showed.Latin America’s largest economy will shrink 2.95 percent this year, according to the weekly central bank poll of about 100 economists, versus a prior estimate of a 2.81 percent contraction.Analysts lowered their 2016 growth forecast for 13 straight weeks and estimate the economy contracted 3.71 percent last year.
1901 is a very long time ago, so no one living today can remember the last time that Brazil’s economy was this bad. We do know that economic troubles of this magnitude usually shake up governments in the Third World. A shakeup may be coming, so stay tuned!
Add to this the corruption scandals and Brazil’s leftist president is in serious problem.
The latest scandal involves Electrobras, the state electric company. This is also from Bloomberg:
In the shadow of Brazil’s once-mighty oil giant, another state-run behemoth is trying to get ahead of the nation’s biggest-ever corruption scandal to avoid the fallout that has already crippled more than a dozen companies.A team of lawyers and specialists hired by Centrais Eletricas Brasileiras SA, known as Eletrobras, started reviewing Latin America’s biggest electric utility in June to determine whether it has had any losses from graft, according to a regulatory filing. Since then, the internal probe has swelled to involve more than 100 investigators, $15 billion of investments, 10 subsidiaries and three of Brazil’s biggest power projects, said a person with direct knowledge of the matter.
For years, Brazilians have known that their crony capitalism ways would come back to haunt them. At the same time, the country’s economy did well, created jobs, bought social peace with government handouts, and kept the public-sector unions quiet.
Today, Brazil can’t create jobs and the middle class is furious. Nobody is happy and the leftist president is the target of all the criticism.
How do you say that the chickens have come home to roost in Portuguese? My guess is that most Brazilians are saying something like that.
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