Brazil: What Now?

Rio: Host of World Cup 2014 and Olympics 2016
Rio: Host of World Cup 2014 and Olympics 2016

Bon dia!

Brazil, officially known as the Federative Republic of Brazil, sits on the precipice of expanding its economic power. As the largest economy in Latin America and seventh largest in the world, Brazil has the potential to expand its global reach. Many investors believe there may not only find paradise in Brazil, but hopefully, a burgeoning enconomy as well. Since the U.S. Federal Reserve began its aggressive expansionary monetary policy in an effort to lower interest rates, Brazil has become a haven for foreign investment dollars.

Unfortunately, it appears the vibrant growth that attracted those investors, seems to have departed with its previous president Luiz Inacio Lula Da Silva. Brazil’s current president Dilma Roussef has delivered the nation’s slowest economy in 24 years. The Brazilian Real sits at a 5 year low while the inflation rate hovers just below 8%.

Espírito Santo  sits in between São Paulo and Rio De Janeiro
Espírito Santo sits in between São Paulo and Rio De Janeiro

In addition, low growth prospects and weak fiscal balances have resulted in a downgrade of its sovereign outlook by rating agency Standard & Poor’s. The company released a statement explaining its decision: “slow GDP growth and continued expansionary fiscal policy has caused some loss in the credibility of economic policy.” Consequently, S&P’s downgrade and the possibility of the U.S. Fed tapering off its buy back program, the flow of Brazil’s foreign investors is has already begun to wane.

Amid the tenuous preparation for the FIFA World Cup in 2014 and the Olympics in 2016, a vicious crime epidemic and social unrest may be the reason Roussef’s approval rating plummeted to 30% from 57% in the month June. To her credit, her approval rating has risen and is now 38.1%. These economic concerns, social issues and protests in the streets are no less exacerbated by the excessive traffic jams known to be commonplace in Brazil’s major cities.

Social unrest in Brazil the people speak. Source:Datafolha June 18, 2013
Social unrest in Brazil the people speak.

According to a Citigroup research report, a Brazilian loses 5% of his productivity due to traffic congestion. Rio De Janeiro’s traffic congestion cost the city in excess of R$ 12 billion. At the time this article was published the exchange rate was 2.2746 so that equals over $5 billion USD. In Sao Paulo, the current congestion costs are nearly 3 times that at R$ 33 billion. The chaotic traffic problem is ironic considering that the country motto is “Ordem e Progresso”, which means “Order and Progress”.

What is most troubling and most important is the social unrest that has resulted in protests. These anti- government demonstrations have been extremely violent and costly due to property damage from vandalism. Demonstrators vehemently despise the government corruption and the use of their tax dollars for the costly World Cup and Olympic preparations.

Heavenly sunset kisses Rio into dusk.
Heavenly sunset kisses Rio into dusk.

Many don’t want FIFA to bring the World Cup to Rio. Instead they have demanded better schools and hospitals. This sentiment is not only heard but seen in various phrases written on buildings and signs. Brazil is filled with people and a culture as bold and beautiful as its landscape. This country has much to offer the global community. Hopefully conditions will improve for this country and its people. Obrigado Brasil. Até mais tarde. Boa sorte.

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