Government scandal and stagnant economy push Brazil towards recession

Government scandal and stagnant economy push Brazil towards recession

Brazil’s credit rating has been downgraded to junk status by the credit rating agency Standard & Poor’s. South America’s largest economy has been rocked in recent months by corruption scandals, inflation, a depreciating currency, and rising national debt.


Not that long ago, Brazil was a darling of the investment world. It was touted as one of the most promising emerging markets in the world, along with Russia, India, China, and South Korea. Together, they were known as the “BRICS.”


Petrobas, Brazil’s state-controlled oil company, is under investigation for a multibillion dollar money laundering scandal that ties into other large Brazilian businesses and government officials. Brazilian president Dilma Rouseff has not been linked to the scandal, but her approval rating has dropped to an alarming 8 percent.


Brazil has grown and expanded over the last decade by exporting commodities with their chief customer being China. 2015 has seen prices in all of Brazil’s major exports drop, and demand from China significantly decreases as their economy slows. The Brazilian Real has lost approximately 25 percent of its value against the dollar so far in 2015.


Protests continued in Brazil over the government's economic policies and the hosting of major sporting events as Brazil's national soccer team prepared to play Japan in the Confederations Cup opening match.     (REUTERS/Ueslei Marcelino)

Protests continued in Brazil over the government’s economic policies and the hosting of major sporting events. (REUTERS/Ueslei Marcelino)

In retrospect, the signs that Brazil was too top heavy were very evident. Government corruption and high taxes make it very difficult to conduct business. The buildup to the 2014 World Cup proved that Brazil lacked the infrastructure and human rights standards of a developed country. Poverty and crime are rampant in both the urban and rural parts of the country.  With Rio de Janiero set to host the 2016 Olympics, President Rouseff must work quickly to prepare her country for the national spotlight. Brazil’s current situation proves that a country cannot compete in the global economy for the long term without a solid domestic base.


How will Brazil’s current economic standings impact the 2016 Olympics? Do you think Brazil will be considered as the host country for any major world event in the future? Sound off here or find me on Twitter @Andrew_Morse4

Andrew Morse

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