Brazil’s Recession Continues

Prior to the Global Financial Crisis, the economy of Brazil was set to become a dominant player on the world stage as a member of the BRICs group of emerging economies, but in recent years, it has not fared well.

In 2014, it was estimated that the Brazilian economy accounted for approximately 3.8% of the global economy. The size of Brazil’s economy is roughly 2.3 trillion Dollars, but it has been mired in recession for six straight quarters; its most persistent recession in 25 years. The third quarter of 2015 saw the Brazilian economy shrink by a further 1.7%, easing from the 2.1% contraction seen in Q2.

Unemployment in Brazil stands at 7.9% of the workforce (October data) worsening from a previous reading of 7.6% in August and standing at its highest level since August 2009. The workforce stands at its lowest level for 13 years, but unemployment is running below the 2001-15 average figure of 8.36% – the lowest value was 4.3% (December 2013) and the highest was 13.1% (August 2003).

The Petrobas scandal has had a very negative effect on Brazilian society and negative ramifications for the economy. Petrobas is a publically traded company, but the government holds a 51% stake. The petrochemical giant was responsible for contributing approximately 10% of the nation’s GDP at its height. At one time, Petrobas was ranked as the sixth largest company by market capitalisation in the world. Some 117 indictments have been handed down already and the total paid in bribes and other forms of corruption is said to top $3 billion. In the wake of the scandal, the business has shed half of its value, some $70 billion, although part of this loss is due to the crash in crude oil prices.

The Brazilian economy has contracted by 4.5% over the past year and investment in the nation has dropped by 15%, marking nine quarters of decline. Inflation in the Brazilian economy is running at 10% which has a significant effect on the disposable income of Brazilians. In a bid to try to curb this, the Brazilian central bank is running interest rates at a (relatively) staggering 14.5%, currently.