{"id":635,"date":"2016-05-02T00:10:52","date_gmt":"2016-05-02T06:10:52","guid":{"rendered":"https:\/\/trends.ufm.edu\/en\/?post_type=articulo-semanal&p=635"},"modified":"2016-11-28T15:28:31","modified_gmt":"2016-11-28T21:28:31","slug":"the-brazilian-crisis-and-its-gray-future","status":"publish","type":"articulo-semanal","link":"https:\/\/trends.ufm.edu\/en\/article\/the-brazilian-crisis-and-its-gray-future\/","title":{"rendered":"The Brazilian Crisis and Its Gray Future"},"content":{"rendered":"

By Edgar Ortiz \u00a0May 2, 2016<\/p>\n

Translated from Spanish by Katarina Hall<\/p>\n

eortiz@ufm.edu<\/a><\/p>\n

 <\/p>\n

It is true that commodity-producing countries have suffered from the fall of international commodity prices. Brazil, in particular, suffered a great extent. If we keep in mind Brazil\u2019s main exports\u2014which include iron, soy, oil, and sugar\u2014it is logical that the country\u2019s trade balance has deteriorated, as mentioned in a September 2015 article.<\/p>\n

Other raw material-producing countries, such as Chile or Colombia, also suffered from the fall of commodities, yet they have gradually recuperated. Brazil, on the other hand, is sinking into one of its worst economic crises.<\/p>\n

The economic crisis is already a fact, but what is troublesome are the elements that paint a rather gray scenario for Brazil\u2019s economic recovery. Therefore, the main factors that prevent Brazil from overcoming its economic crisis should be examined.<\/p>\n

Public Debt: <\/strong>Brazil raised its public debt to GDP ratio by 15 percentage points since 2013. By December 2014, however, Moody was already warning about the \u201chidden\u201d or indirect debt that proved to be even worse for Brazil. The debts of the Brazilian government in pensions and other guarantees on private debt made the government\u2019s total debt to the one reflected in the following graph. It shows that in February of this year, Moody downgraded Brazil\u2019s rating to \u201cjunk bonds\u201d and estimated that public debt to GDP can reach 80% by 2018.<\/p>\n

\"A.52-1BrazilGovernmentDebtoGDP\"<\/a>

Source: Bank of Guatemala<\/p><\/div>\n

 <\/p>\n

Depreciation<\/strong>: The Brazilian real suffered; it depreciated more than 40% against the dollar in 2015. This is logical considering the commercial deficit in 2014 and the poor performance of the exporting prices of goods. The risk posed by a depreciated real is explained by two factors. First, foreign public debt poses a risk because a depreciated real makes it more expensive to repay the public debt denominated in dollars. Secondly, it affected companies indebted in dollars and made corporate debt denominated dollars fall since 2014.<\/p>\n

 <\/p>\n

\"A.52-2DollarsFall\"<\/a>

Source: Bank of Guatemala<\/p><\/div>\n

 <\/p>\n

Political Crisis<\/strong>: The corruption scandals surrounding the state company Petrobras produced a severe political crisis in Brazil. Rousseff\u2019s government has shown instability and she faces possible impeachment. Ideally, politics should not be relevant, but the actual political crisis has not sent encouraging messages to investors. Considering the halt of the real\u2019s depreciation, there is an incentive to intervene in the country. Yet distrust in institutions prevents capital from flowing into Brazil.<\/p>\n","protected":false},"excerpt":{"rendered":"

It is true that commodity-producing countries have suffered from the fall of international commodity prices. Brazil, in particular, suffered a great extent. If we keep in mind Brazil\u2019s main exports\u2014which include iron, soy, oil, and sugar\u2014it is logical that the country\u2019s trade balance has deteriorated, as mentioned in a September 2015 article.<\/p>\n","protected":false},"author":106,"featured_media":638,"comment_status":"open","ping_status":"closed","template":"","meta":{"anio":"","mes":"","id_estadisticas":"","newsletter_link":"","portada_informe":"","subtitulo":"","footnotes":""},"tags":[44],"coauthors":[],"class_list":["post-635","articulo-semanal","type-articulo-semanal","status-publish","has-post-thumbnail","hentry","tag-brazil"],"meta_box":[],"_links":{"self":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/635","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal"}],"about":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/types\/articulo-semanal"}],"author":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/comments?post=635"}],"version-history":[{"count":1,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/635\/revisions"}],"predecessor-version":[{"id":705,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/635\/revisions\/705"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/media\/638"}],"wp:attachment":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/media?parent=635"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/tags?post=635"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/coauthors?post=635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}