This page has been archived and commenting is disabled.
Just As Brazil Hits Rock Bottom, Things Are About To Get Even Worse
For anyone who might have missed it, Brazil is in trouble.
The country is "at the center of a triple unwind of EM credit, China’s leverage, and US monetary easing" (to quote Morgan Stanley) and as Goldman recently pointed out, faces a stagflationary nightmare.
Last quarter, Brazil suffered through the worst growth-inflation mix in over ten years. As Goldman put it, "since 1Q2004 there has not been a single quarter in which we had simultaneously higher inflation and lower growth than during 2Q2015."
And then there's the twin deficit problem. Here's Goldman again:
Over the last 11.5 years, we cannot identify a month with a strictly-worse fiscal-CA deficit outcome than that of May-15 (lower left quadrant is empty). In fact, at 7.9% of GDP the fiscal deficit is now the widest it has ever been since Jan-04, and there were only a few months (5 out of 137 months in the sample) were the current account deficit was marginally wider than currently.
Meanwhile, as we mentioned on Monday, Dilma Rousseff is now the most unpopular democratically elected president since a military dictatorship ended in 1985, with an approval rating of just 8%. In a recent poll, 71% said they disapprove of the way Rousseff is doing her job... and two-thirds would like to see her impeached. Here’s Bloomberg summing up the situation:
To be sure, the president faces a host of challenges this month, not least of which is a nationwide protest planned for Aug. 16.
The country’s audit court also must decide whether the government broke the fiscal law by doctoring budget results last year. A ruling against the government could provide the legal foundation to start impeachment hearings, opposition lawmakers say. Her administration says previous presidents used the same practices.
Investors are concerned that the political instability will push Brazil into a deeper recession and make it increasingly vulnerable to a sovereign-credit downgrade. The real has depreciated 8.1 percent in the last month, the biggest decline among 16 major currencies tracked by Bloomberg.
Given all of this, just about the last thing Brazil needed was for China to officially enter the global currency wars, which is of course exactly what happened overnight. Our response:
Biggest immediate loser from China's devaluation: Brazil
— zerohedge (@zerohedge) August 11, 2015
And the response from Brazil's trade ministry (via Reuters):
Brazil's Trade Minister Armando Monteiro on Tuesday said China's decision to devalue the yuan could hurt the country's manufacturing exports.
So what lies ahead for Brazil given all of the above? Well, further BRL weakness - or at least according to Goldman. Here's more:
We are moving our BRL forecasts to show further downside – we expect $/BRL to reach 4.00 in 12 months (relative to 3.55 previously). A weaker BRL is part of a necessary adjustment to address the macro imbalances in Brazil; and the combination of a weak and increasingly back-loaded path of fiscal adjustment and a central bank that appears to be done with tightening policy for now suggests that the exchange rate is likely to bear more of the overall burden of absorbing the impact of the commodity price downdraft, restoring competitiveness and correcting the current account deficit.
Brazil stands at a crossroads – both roads involve currency depreciation. The combination of significant macro challenges (economic contraction, elevated inflation and large fiscal and current account deficits) and a deteriorating political and institutional backdrop means that Brazil stands at a pivotal crossroads. One road involves the risk of a further deterioration in the political backdrop morphing into a full-fledged governability and institutional crisis (potentially including the departure of key policymakers) and a further deterioration in investor (and rating agency) confidence, with an associated additional hit to an already contracting economy. The other road involves a potential stabilisation in the political picture, which in turn would provide the authorities with room to undertake necessary short- and medium-term fiscal consolidation measures, coupled with monetary easing further down the line. In either case, we think the BRL is likely to depreciate further because it is hard for us to see a route back to a more balanced set of macro outcomes in Brazil that do not involve currency weakness. Along the first road, the depreciation is likely to be sharper and disruptive, with scope for overshooting and an eventual rebound; the alternative scenario would likely involve a grinding, more controlled move, potentially encouraged by policymakers.
Macro imbalances in Brazil are large, the worst in almost a decade...We have developed a simple scoring algorithm to assess the scale of internal (inflation relative to target) and external imbalances (current accounts relative to sustainable levels) and, as Exhibit 1 shows, in Brazil these imbalances are at their widest combined level in a decade. The fiscal deficit at -8.1% of GDP is also at its widest in more than 20 years, with the combined twin deficits now tracking at a disquieting 12.5% of GDP.
Of course as we said late last month, the simple fact is that whether it's China, runaway stagflation, or simple politician greed and corruption, Brazil has passed the recession phase and its economy is in absolute free fall and against a backdrop of an escalating currency war (which the country's most important trading partner has just officially entered), unattainable fiscal targets, and protracted weakness in commodity prices, the path to stabilization and rebalancing is anything but clear, but what does seem virtually certain is that Brazil has a date with junk status in the not-so-distant future.
And on cue, just moments ago:
- BRAZIL CUT TO Baa3 FROM Baa2 BY MOODY'S; OUTLOOK TO STABLE
So that's one step up from junk for Moody's and one step from junk for S&P - it shouldn't be long now, because no matter what Moody's says, there isn't anything "stable" about this situation.
We suppose the only lingering questions are whether Rousseff will be impeached and whether economic decay, a dangerously unstable political situation, and problems of a more, shall we say, "putrid" nature, will conspire to make Rio a veritable ghost town for next summer's Olympic games.
Then again, this young lady doesn't seem particularly concerned...
»
- 74432 reads
- Printer-friendly version
- Send to friend
- advertisements -
Right on Laddie!!
Equal Justice for Whites no matter if it is police treatment, court treatment, prosecution, DOJ/FBI Treatment, or... employment within the Corrupt Federal .Gov which we know protects blacks, other races, women, and probably transsexuals.
What is the quote, evil only requires man to do nothing?
Well that applies to blacks. They must protect justice and truth in their families, communities, and schools... and night clubs. If we send people to subvert Egypt, or Yemen, or Somalia, or Sudan, or Nigeria... likely we will subvert our own people in due time. After all we promote our people that oppress sovereignty in other countries and they have more domestic powers later on.
As soon as the 7 Billion ($'s) that Brazil is spending on the 2106 Olympics kicks in and circulates throughout its economy they will be the envy of the world let alone one of the most prosperous countries in the world? sarc/on
Nothing that a Stones concert in Rio can't fix.
Plot against Brazilian President Dilma Rousseff?
Why?
Plot against Brazilian President?
(Sorry, the URL for my previous post did not go through)
Also these two articles (in Portuguese but you can use Google Translate):
Most Brazilians believe that Brazil would be worse if Aécio had won, says research
A Country on the Brink of Coup d'Etat
Even Jordan beat out Brazil on the ole business freedom index, and by a considerable sum. Jordan: 60, Brazil: 50, US: 80, yes everything is relative. Imagine the US at 80 and the B in BRICS managing a mere 50.
http://www.economywatch.com/economic-statistics/Jordan/Business_Freedom/
If I remember it right, UK, Nederlands, Luxembourg score a 90, Denmark scored a 95.
Kind of interesting that US is so low.
The police state probably brings US Banking and Oversight into a bad light.
And FACTA.
Yeah, I checked most of Europe, and most score higher than the US, sans Italy, Iberia, and most of Eastern Europe.
Well at least the Castillo still remain atop the Oligarch pyramid, no?
Fuck Israel. O shit this is the wrong blog. Anyway the Us is in worst shape and it will go down first. fuck israel. there i said it.
Fuck Israel. O shit this is the wrong blog. Anyway the fashions this year is in worse shape and garden hoses are totally effed up too. Fuck israel, there I too gave the only explanation to so much.
Life is immeasurably more simple (minded) and curiously more frustrating too, as those Got Damned Joooos always seem to slip the snare. Oh well, out here.
This has all of the features of a US sponsored “color revolution”. Washington US wants Rousseff out. As president, she was one of the five BRICS heads who signed the formation of the Development Bank of BRICS, with an initial authorized capital of $ 100 billion and a reserve fund of another 100 billion dollars. It also supports a new international reserve currency to complement and eventually replace the dollar.
Link: thesaker.is/sitrep-from-brazil-is-a-coup-detat-next/
Bullish for tollhouse cookies with brazill nuts.
Hope Victoria goes for a swim while she's there.
Brazill (sic) nuts in Tollhouse cookies. What, are you a commie or something?
Replay 1964 Cold War Junta in Brazil... yeah maybe they want to do it on the "Quiet" as current trend is Economic Hitmen, IMF, and Jackals.
After 8 years or so of Lula, Democratic Labor Party, (same socialist Liberal Party) signing treaties or trade agreements with BRIICS. The Western Banks proved they can take her out and her bankers don't know crap.
That is all they need to say.
It is all about power.
Brazil – is a coup d’etat next?
Very appropriate quotes.
Valuable comparison.
Yet another Total Bullshit article on ZH. Mist of the trolls conviniently forget or are so ignorant to what USA did to Chile when the Chilenians dared to choose a Communist president. USA made sure the Chilian economy will emplode, thus settign the sage for a queue. Of coruse sicen the CHilean thing happened in 1973, most of the Americans here will hardly remember it. But I do.
"A report prepared by the United States Intelligence Community in 2000, at the direction of the National Intelligence Council, that echoed the Church committee, states that
Although CIA did not instigate the coup that ended Allende's government on 11 September 1973, it was aware of coup-plotting by the military, had ongoing intelligence collection relationships with some plotters, and—because CIA did not discourage the takeover and had sought to instigate a coup in 1970—probably appeared to condone it."
-
The Chicago Boys apparently were wide spread in the Cone of South America. They were the students of University of Chicago/Chicago University if I remember right. They were people of South America. But they chose Domestic War, Dirty War, and Junta/Coup instead of Democracy/Forums... This was a decision by the Elites of Chile' and other countries to Suppress the People, the Wages, the Advances provided to the Middle Class... This was Sedition/Treason.
But there is no way to bring those kinds of issue up in the USA or Europe. We don't recognize harm from foreigner entities in this context.
But of course the Anglo Church and Catholic Church picked out prime land and then killed off the people and kids with biological war, starvation, beatings, oppression, and worse.
-
We always have fascists among us. We have strong personalities that will do violence for a principal even without hard evidence. This is group think or a mob.
Americans don't do well with historical reference. This is a problem that may lead to further war against the US. The press is controlled by TPTB. This is a National Security Threat. Dumb people can be turned against each other.
Elite Strategy: Keep people dumb and give them a history or narrative in the Media or popular culture that provides ready made Enemies which can be pointed out at any time... to be targets of the anger of the masses.
Classical military thought.
It ain't sophisticated. It ain't complicated. It is just a plan to execute when people start riots, or start looking for leaders to blame.
Word.
Looks like Brazil needs to do some creative financial accounting to make the figures look better...ok..I know...let's bring in some talented folks to get this started..wonder who can help? if you answered Goldman Sachs...you get a star by your name...oh wait..they tried this in Greece and it backfired..damn..back to the drawing boards..
Bitcoin $271