7 Jan 2016
Brazilian economy: New turn for the worse - Wells Fargo
FXStreet (Córdoba) - According to Eugenio J. Alemán, Senior Economist at Wells Fargo, the current economic crisis in Brazil is showing staying power and thing have deteriorated further during the last months of 2015.
Key Quotes:
“Industrial production plunged 12.4 percent in November compared to the previous year and by 2.4 percent compared to October 2015. Thus, the economy was still deteriorating at the end of 2015.”
“This suggests that the Brazilian economy, which had given signs during the third quarter of the year that, perhaps, the worst was over, has taken a new turn for the worse.”
“Although some part of the crisis is foreign and outside the control of Brazilian authorities, a larger part of the current crisis is domestic, including high and increasing inflation, a large and increasing fiscal deficit, the Petrobras fraud investigation and the ensuing political crisis, which could possibly include the impeachment of the president.”
“Another big difference relative to late 2008 and 2009 is that the current crisis is showing staying power.”
“In fact, things have actually deteriorated further during the last months of 2015. Furthermore, we do not expect any recovery as we saw after the global recession any time soon.”
“Thus, we expect industrial production will continue to worsen and see no likely improvement for several months, especially if the current political crisis deteriorates further. Furthermore, Brazil is going to hold the Summer Olympics later this year and under current conditions, the event will probably represent a further drag in economic activity.”
“On the positive side, the Brazilian currency is cheap so this may be a good time for tourism, which would help the eating and drinking sectors further.”
Key Quotes:
“Industrial production plunged 12.4 percent in November compared to the previous year and by 2.4 percent compared to October 2015. Thus, the economy was still deteriorating at the end of 2015.”
“This suggests that the Brazilian economy, which had given signs during the third quarter of the year that, perhaps, the worst was over, has taken a new turn for the worse.”
“Although some part of the crisis is foreign and outside the control of Brazilian authorities, a larger part of the current crisis is domestic, including high and increasing inflation, a large and increasing fiscal deficit, the Petrobras fraud investigation and the ensuing political crisis, which could possibly include the impeachment of the president.”
“Another big difference relative to late 2008 and 2009 is that the current crisis is showing staying power.”
“In fact, things have actually deteriorated further during the last months of 2015. Furthermore, we do not expect any recovery as we saw after the global recession any time soon.”
“Thus, we expect industrial production will continue to worsen and see no likely improvement for several months, especially if the current political crisis deteriorates further. Furthermore, Brazil is going to hold the Summer Olympics later this year and under current conditions, the event will probably represent a further drag in economic activity.”
“On the positive side, the Brazilian currency is cheap so this may be a good time for tourism, which would help the eating and drinking sectors further.”