Nearshore Americas

Bad News Continues for Brazil’s Economy as Political Chaos Intensifies

Brazil’s economy is slipping deeper into economic turmoil , according to the latest industrial production data released by the government. Industrial output shrank 9% over the 12 months leading up to February, with the automotive, machinery, and electronic sectors hit the hardest.
This is more bad news for Latin America’s largest economy, which is struggling to generate jobs amidst high inflation, weak demand for commodities, and a volatile political climate. According to the trade ministry, exports also slid by 6% in March compared to the same month last year.
Even imports were down a record 30%. That’s largely because Brazil’s middle class has been hit hard by the recession. They were the good consumers when all was well within Latin America’s biggest economy.
Fewer imports does, however, mean a higher trade surplus, which is currently being hailed by the government as a rare spot of good news. The national currency — the real, which was in free fall throughout 2015 — has also risen by 9.5% against the dollar over the past month.
That is a small gain because its currency decreased 33% in value last year alone. With oil prices remaining at historical low and President Dilma Rousseff doing everything she can to stave off impeachment, Brazil’s economy is a long way away from recovering.
The economy contracted 3.8% last year. That’s the biggest annual drop since 1990, and the country is in its longest recession since the 1930s.
Low growth and high inflation are wreaking havoc. In the past few years, Brazil continuously raised interest rates in an attempt to push down inflation, but the high interest rates seem to have prevented businesses from expanding. With the Petrobras scandal creating a lot of heat politically, the government’s capacity to fix the economic problems seems to have been weakened.
In 2011, Brazil was the world’s sixth largest economy, surpassing the United Kingdom. Large oil reserves attracted development and foreign investors, and China became its top trade partner. But its fortune changed dramatically as oil prices started to slump.

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Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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