Brazil’s economy is still resisting to come back out of recession. Countries economy is trying to get out from serious, long and tiring economic stagnation. The main reasons of the decadence in Brazil’s economy were distrustful citizens, because of corruption in almost, actually not in almost in every political institution, very low consumer and business confidence, and low investment from the region. According to “Datafolha” poll data released on 2016, 63 percent of respondents throughout the country believed that Brazil’s government was “bad or terrible”, and only 13 percent (in other poll data agencies website’s it is even 6) were thinking that governmental institutions are doing a “good or excellent” work. It looks like that people’s patience have drained out, as in 2011 Brazil’s citizens showed 80 percent of trust in all governmental bodies. Only 4 other South America’s countries have less confidence in their government bodies: Columbia, Peru, Ecuador and Chile.
So what has gone wrong in Brazil? First thing corruption. The impeachment trial against Dilma Rousseff. The opposition indicted that ex Brazil president used the government’s accounts in 2014 when she was in the competition of her re-election. The trust figures that we have is explainable by the corruption scandals in the last decade, which has touched the highest groups of business and politics in the country. The biggest two were: Mensalao and Operation Car Wash.
“Mensalao” corruption scandal is a typical inequality and protectionism example. The wealthy business groups who controls the bigger part of the capital, were trying to pay the members of Congress to vote in crucial meeting, where policies were accepted. The scandal started in 2012, and in 2012 Brazil’s Supreme Courted concluded the Mensalao trial were 25 politicians, bankers and businessmen had been convicted. Some of whom were holding high positions in Worker’s Party. Yes, the same one as Ms. Ex-President Dilma Rousseff.
Second biggest scandal called “Operation Car Wash”. Indictments was released in 2014. It had involved biggest state oil company Petrobras. Allegations were leaned on that Petrobras were highly overcharged for building contracts. The overcharged peace of money had been passed to Petrobras executives and politicians who were taking part in the deal. This operation is worth highlighting that last two Brazil’s presidents are involved with this scandal. Ms. Dilma Rousseff was impeached having strong information that she was involved in this scandal.
Corruption scandals in the country had not only triggered big protests in entire country, but as well caused big economic stagnation. In 2015, economy shrank to its worst since 1981, by 3.8 percent. Inflation reached 10.7 percent, highest in 12 years and unemployment increased by 9 percent. The forecasts were disappointing, but it looks like that Brazils is showing recovery signs, as political uncertainty diminishes.
International Monetary Fund and Brazil Central Bank has released data which shows that the larger economic recovery started in the third quarter of 2016. GDP growth from -2.90 percent to 0.50 percent GDP growth. Central Brazil Bank has lowered its interest rates, to support nation’s recovery, but before continuing to Brazil’s economic recovery it would be worth to look into other reason than domestic political issues.
• Countries investments were continuously unstable, which led to decreased competitiveness and difficult financial conditions.
• Consumption lowered due to crisis in labour market and difficulties in credit agencies.
• Economic policies were not functioning properly, which led to economic deficit.
Consumers finally are finding some trust in their government as political uncertainty with the new president’s appointment. Brazil posted the largest rise in consumer confidence in 2016. Consumer trust and confidence could be the first aid to pull out Brazil’s economy out of stagnation with more spending and lending. That would enable to overall economic growth. As country citizens are purchasing and consuming more the prices become more stable. Within 12 months inflation rate decined to 5.4 percent in January 2017, compared to 6.3 percent as in the previous month, and 10.7 percent a year ago. The 5.4 inflation rate was lowest since September 2012. Consumers are finding courage to consume and this could boost up countries economic activity in various ways. Rising consumer confidence has a fast reaction on the companies involved in consumer and retail businesses.
Export contains 13 percent of GDP in Brazil. Brazil is expected to attain an incline in its economic growth in 2017, because of rising commodity market are policy amendments in export. Commodity market forms 50 percent of Brazil’s export. Countries commodity indexes steadily rises in agriculture, metal and energy. Brazil is a major iron ore exporter. As in 2015 iron prices fell 50 percent because of decreased demand in China. In 2008 China’s construction boom boosted Brazil’s economy greatly, but as years passed the demand lowered, putting largest Brazil’s iron export companies under pressure, but in 2017 it is likely that iron prices will increase due to rise of Chinas infrastructure plans, it should be a helpful boost for Brazil’s economy as well.
The biggest aid is awaited from services sector as it contributed 66 percent to GDP in 2015. For comparison the industrial sector contributes 28.5 percent and agricultural 5.5 percent towards GDP.
However, the country still struggles with major development challenges in the 21st century. Especially in agriculture. However improved commodity market, decreased inflation, GDP growth and restrained corrupted politician and business groups is bighting Brazil’s future in 2017.
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