Brazil’s economy

Why deepening recession, 10 percent inflation and rising unemployment are far scarier than the Zika virus

Photo by: TRTWorld
Photo by: TRTWorld

Sao Paulo, Brazil’s economic capital

The fall in global commodity prices has something to do with Brazil’s economic woes… But the truth is, President Dilma Rousseff and her Worker’s Party have spent too much - unwisely.

Higher pensions and unproductive tax breaks to favoured industries have resulted in the fiscal deficit swelling from 2 percent of GDP in 2010 to 10 percent of GDP in 2015.

And that resulted in fleeing foreign investors - the driving force behind Brazil’s potent ascension is slowing down… 

The government has been postponing some crucial reforms, like work and pensions. And has failed to reduce spending.

But what Brazil is going through is not only an economic crisis…  it is a political disaster.

Brazilian President Dilma Rousseff is facing impeachment proceedings in Congress, accused of hiding the size of the budget deficit. [Reuters]

Brazil’s governing body has been discredited by the worst bribery scandal in the country’s history: 32 members of congress are currently under formal investigation. 

And Dilma Rousseff - the most unpopular leader in living history with a 12 percent approval rating - is facing impeachment proceedings in Congress. 

So even if there’s a will to reform - it might be too difficult for President Dilma Rousseff and her Worker’s Party to do that now.

To make matters worse, in came the Zika virus...

Ordinary Brazilians are definitely more concerned about how their living standards have been affected by the economy than about the Zika outbreak - even though that might not apply to pregnant women who are panicking with the lack of information about the links between the virus and microcephaly in newborns (a condition in which babies are born with abnormally small heads).

The government was accused of taking too long to respond to the outbreak. And blamed the lack of coordinated efforts on… the economic crisis! 

Brazil lifted millions out of poverty, but recession might halt that achievement. [TRTWorld]

One of Brazil’s biggest achievements was to lift tens of millions of people out of poverty.

Now recession is likely to halt that - and may even reverse it. 

Unemployment is on the rise. Inflation has just passed 10 percent.

And despite the usual optimism, Brazilians are bracing for a complicated year and even more bad news ahead: “we know it will get worse before it gets better”.

Author: Anelise Borges