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Is This Country Latin America's Next "Argentina"
One week ago we reported on the economic devastation in he one Latin American country which has yet to be noticed by the broader financial media: Brazil. This is what we said:
Back on December 29 of last year, we explained how under the burden of its soaring current account deficit, and its its first primary fiscal deficit since 1998, not to mention numerous corruption scandals and a dysfunctional monetary policy, the Brazilian economy "just imploded." We also noted the main reason for the Latin American collapse: Brazil had for the past decade become China's favorite source of commodities, and now that China suddenly no longer needed commodities, the Brazilian economy went into freefall.
We followed this up a month later with "Brazil's Economy Is On The Verge Of Total Collapse" which repeated more of the same, only this time the situation was even worse.
It took the rating agencies 7 months to figure out what our readers had known since 2014, when two days ago S&P downgraded Brazil's credit rating from Stable to Negative citing, what else, the "sharp deterioration of the growth and fiscal consolidation outlook and heightened political/institutional friction" adding that "the negative outlook reflects the agency’s view of a “greater than one–in–three likelihood that the policy correction will face further slippage given fluid political dynamics and that the return to a firmer growth trajectory will take longer than expected."
Following the S&P announcement others promptly jumped on the bandwagon, most prominently Goldman Sachs which had some jarring words about what is going on in Brazil's economy:
Records show that over the last 11 years we cannot find a period with a strictly-worse growth-inflation outcome than that of 2Q2015 . That is, since 1Q2004 there has not been a single quarter in which we had simultaneously higher inflation and lower growth than during 2Q2015. In fact, in 96% of the 46 quarters between 1Q2004 and 2Q2015 the economy was delivering simultaneously higher growth and lower inflation than during 2Q2015.
We concluded as follows: "In short, the Brazilian economy has never been worse and just to hammer that point home, Goldman added a chart which makes it quite clear that Brazil is not in a recession: it is almost certainly in a depression at this moment - note the recession bar on the chart below and where it is now."
Today, following another spike in negative news, it appears that the credit markets have finally woken up, and a quick look at Brazil's CDS shows that following today's spike to 314bps, the country's implied default risk is back to levels last seen in April of 2009!
And here's why we expect the blowout in CDS not to stop here.
First, overnight the WSJ reported that Brazilian President Dilma Rousseff’s approval rating has slumped into the single digits to a record low, as the country’s economy struggles and a corruption scandal grows.
Only 8% of respondents across the country said Ms. Rousseff’s administration was “good or excellent,” and 71% considered it to be “bad or terrible,” according to a poll released Thursday by the Datafolha polling institute. That compared with approval of 10% and disapproval of 65% in a June poll, also by Datafolha. The survey result is the lowest for any president since 1990, when the polling series began.
Ms. Rousseff’s approval rating in the latest poll was lower even than former President Fernando Collor de Mello, who slipped to 9% in September 1992, shortly before he was impeached.
As the WSJ adds, Rousseff is facing a combination of negative factors, of which the depressionary economy is just one: "The county’s economy is expected to contract by around 1.8% this year, according to a central bank survey of private sector bank economists. Annual inflation stands at 9.25%, well above the central bank’s tolerance band of 2.5% to 6.5%. And the poor economic conditions are raising fears among Brazilians that they could lose their jobs."
Then there is corruption:
Meanwhile, a continuing investigation surrounding state-run oil company Petróleo Brasileiro SA, or Petrobras, is also weighing on Ms. Rousseff’s approval rating, though she hasn’t been accused of any wrongdoing and has denied involvement in the scandal. Petrobras has said it is cooperating with the investigation.
Earlier this week, federal police arrested José Dirceu, a former minister of ex-President Luiz Inácio Lula da Silva, on allegations that he received bribes from former Petrobras executives. A lawyer representing Mr. Dirceu said he denies any wrongdoing.
Mr. da Silva, who handpicked Ms. Rousseff as his party’s candidate to succeed him, hasn’t been implicated in the Petrobras scandal.
Worse, like in Greece, Brazil's ruling coalition is now fracturing, when yesterday two parties broke from President Dilma Rousseff’s ruling coalition, further eroding support for her measures to shore up the country’s fiscal accounts.
This happened after the lower house approved in a first round vote a constitutional amendment by 445 against 16 votes granting salary increases to police chiefs, prosecutors and government attorneys. The bill still needs to pass a second round vote before going to the Senate.
Earlier, leaders of the Brazilian Labor Party and the Democratic Labor Party, or PTB and PDT, said they would act independently and no longer participate in meetings of the ruling coalition. The parties together have 44 out of 513 seats in the Chamber.
But Brazil's biggest concern, the one from which all of its other problems stem, is China. Unless the country that was the driver of Brazil's commodity export golden age returns to its place as Brazil's most important trading partner, no matter what fiscal or monetary policies Brazil implements, the domestic politics, already ugly, are set to get worse.
And as everyone knows by now, China has its own spate of problems to deal with, with Brazil's commodity export troubles far on the back burner.
Which is why expect more credit market participants to notice the depressionary developments in brazil, and as the country's CDS continue to blow out, many will start asking themselves: is Brazil the next Argentina?
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I came for the picture of the girls?
How come the important stuff, like hottie pics, - are so damned small ?
If Brazil collapses, then the hotties in the picture will trade on their looks, and get as much free stuff as they can.
Wait, they're already doing that? Women have ALWAYS done that?
Never mind then...
Vent, you came for the girls, and all you got was a popup ad.
Welcome to the new ZH.
use ghostery, you fools....
a country in a depression probably shouldnt spend billions on dumbass olympic infrastructure projects that will only get used once and then just sit there. Ask the greeks how well all the building for the olympics worked out for them.
Adblock works fine too. but where are the girls?
Should we blame the women for playing to men's weaknesses. Whose fault is it when the little head takes control?
Besides, we are all whoring in one form or another.
Yes, we can blame them. And no, we're not all whoring.
Cooperation yields more, much much more, than manipulation. True in economies, and also in relationships.
But that simple fact is lost on some. Too bad.
just search 'brazil women', images. Plenty to go around. Gotta remember 'fair use'.
so that's why people go blind while doing it
Hispanic women are so hot, I wish they came to the USA ....
...mmm... wait a sec.....
Hispanic population reaches record 55 millionhttp://www.pewresearch.org/fact-tank/2015/06/25/u-s-hispanic-population-...
Here in Texas we mostly get the criminals and fat mamacitas. And a couple of pendejos.
Profoundly disagree.
"Hispanic women are so hot..."
Just as long as you can gag them.
Not hard when they are kneeling.
Well, something should be hard, but not the gagging part..
The one that includes the two fingers carefully dealing with a hidden issue would have been more appropriate for the article
Yeah, where are the bunda pics?
https://youtu.be/wizqWLtSRzE
lol...Arnie soft core...what a riot!
There you go: http://i.imgur.com/AgVbXmg.jpg
For God's sake, don't let this mess spread to Chile. Simon Black convinced me to buy a bug out ranch there.
Brazil the next Argentina?
??????? the next Argentina
Many countries are going to be the next Argentina
I'm watching Mexico. The peso is getting trashed.
"I'm watching Mexico. The peso is getting trashed."
Indeed, they are a lot more dependent on China than a lot of people realize. And of course, they are heavily dependent on the US economy, which we know is a lot worse than is officially reported.
US --> next Ukraine (plus Nukes)
Pueto Rico --> next Greece
UK --> next Zimbabwe (plus Noth Korean surveillance)
Russia --> Russia
Hey, me too. Maybe we will be neighbors! We could fight the whole Chilean army when they come to take our gold.
Didn't they make a movie about that?
Chile has an army? Simon didn't mention that in the sales literature.
But hey, they had the world cup and now will host the Olympics! That counts for something and will give them nice looking stadiums that they will only use a couple of times. Like that football stadium they built in the jungle for 2 games and that now is gathering tropical dust.
So the World Cup/Olympic curse trashes another country. What would have been epic is for them to have built the next "world's tallest building" to get that curse lit off too.
Makes it really seem like Boston dodged an NWO bullet, doesn't it?
Hey, you weren't supposed to notice that.
The Olympics will increase the debt or will it save the country? I say both, the former will be reality and the latter will be the delusion.
Krugman and i are going to have to disagree with you. Debt is the answer. Debt is your friend. The more debt you have they less it becomes your problem. Nothing can be solved without more debt.
/s
Wherever the Olympics shows up, that's the next country to collapse.
Shh, they won't know if you don't tell them. These idiot host countries actually think the olympics is an asset, not a liability.
Yes! They must be punished for daring to challenge USD hegemony. If free markets really existed in CDS, Japan would have been a smoking heap of financial rubble long ago...
I'm sure hosting the Olympics will help with their GDP, look what the Olympics did for Greece. Oh wait...
If the IMF comes knocking with a loan to help bolster your bid for the Olympics, don't answer the door.
Clearly the best thing to do is for the fed to raise rates to slow this booming global eCONomy.
You are on fire today................Dr.Engali
Doc is always on fire. Our friendly neighborhood Dr.
Broken BRICS, ailing ASEAN, eunuched EUROland, and a de-balled Dollar.
Who'd have thought that in the end it'll be the Jamaican economy that will support the planet?
Brazil is marginal cost commodity producer, a bleeder. Large production cutbacks underway:
http://winteractionables.com/?p=23496
So.... they're broke, just like every other country. Is there really any choice left for any country than 1. Print more money. 2. Back your dollar with precious metal. (Or in the U.S. case, go to war and steal precious metal)
I wouldnt write them off just yet. Brazil is having a hard time because of the slump in Chinese imports for commodities. But they are not dead in the water.
BY THE WAY, in response to monetary problems and currency issues the Central Bank of Brazil has raised its rates - and they have done so in a big way. Can you actually name any other country that has the guts to raise the rates at this time? Certainly not the USA or anyone in Europe. So there is no point in "pointing the finger" at Brazil.
Bingo. Brazil also has abandant resources and is investing in their own technology infrastructure. They still like the dollar, but will dump it, like China once they are positioned to do so.
Tick tock motherfuckers...
Brasil's SELAC rate is about 14.25% at the moment but it has limited effect on inflation because it is inflationary expectations that is always the problem there.
Russia
Brazil is raising rates because inflation is raging out of control, particularly with a strong dollar. This isn't gutsy, it's self preservation. Disclosure: lived in Brazil, owned property in Brazil and married to one of those hot Brazilians who wouldn't return to her home country if they pointed a gun to her head.
Lula & Dildo have almost singlehandedly destroyed that country. The Hammer & Sickle strikes again.....
They had a hell of a Real Estate boom for the last 10 years....they built millions of units....
I'm only here for the pic......
Where's the DAMN PICTURES?????
Like with a lot of other commodity-based economies, the Brazilians are convinced on every uptick in the cycle that it's finally their turn to be a first world economy. Then commodities crash and cruel reality returns. Yet there is never a serious discussion of the merits of capitalism over socialism.
Rinse, repeat.
And yeah, where are the pictures?
Same place as always: at the bottom of the printer-friendly version :-)
You da real MVP
Must be running out of Petro Bras for their women...
I bet the agricultural - commodity trade based economy ain't doing so well with a severe drought, global trade death spiral, and overall commodity price correction lol! I hope the hot Brazilian girls start finding some gold to mine cuz' inflation is gonna be a bitch soon
And the exchange rate for USD vs BRL is outstanding right now!
I went to RIO in 2004, back when the exchange rate was similar, and we had an epic time. My God! The women there are like athletic models and are totally uninhibited. RIP to "Help Discoteca" right off Impanema Beach which closed in 2010. 2000 smoking hot girls in there every night. You will be missed.
http://riotimesonline.com/brazil-news/rio-politics/help-closed-and-rio-m...
Annual inflation stands at 9.25%, well above the central bank’s tolerance band of 2.5% to 6.5%.
Central banks cause inflation ... they don't tolerate it. 0% is the right level for inflation.
Brazil can't be the next Argentina unless it has an illegitimate sovereignty claim: https://www.academia.edu/10490336/Argentinas_Illegitimate_Sovereignty_Claims
Take plenty of so-called "Hard Currencies" with you, boyz and womyn, next year for the Dopalitics... A certain coffee exporting nation will be pretty hungry for something that isn't going through hyperinflation by then. And maybe just maybe their Conartists, excuse me, politicians, might lift the stupid visa requirement to actually come down and get life-threatening sunburn and overdose of "Queijo de coalho" (vendor bronzed cheese) out on their beaches.
Click bait icons??? At least give us the larger pic of the bikini girls. WTF?
Quote: "Brazil had for the past decade become China's favorite source of commodities, and now that China suddenly no longer needed commodities, the Brazilian economy went into freefall."
Which goes to show that in spite of newfound capitalism in China, the chaotic intent that fosters centralization founded from revolutionary Marxism is still alive in China.