Brazil
crisis: Economy spirals deeper into recession, by Patrick Gillespie @CNNMoney 6/1/16
Amid
a political crisis, Brazil has dived deeper into recession. Brazil's
economy, the largest in Latin America, shrank 5.4% in the first quarter of this
year, according to government figures released Wednesday.
The
news comes as Brazil is only 65 days away from hosting the Summer Olympics in Rio de Janeiro and the country is in the midst of
immense political turmoil.
Just
last month, President Dilma Rousseff was temporarily suspended by a congressional impeachment vote. Her
vice president, Michel Temer, has taken over as interim president.
Experts
had forecast Brazil's economy to shrink more than it did. The
better-than-expected number reflected a last ditch effort by Rousseff to win
over public support by increasing government spending in April prior to the
vote.
"The
breakdown of the contributions to [economic activity] still reveals extreme
weakness in key parts of the economy," says Neil Shearing, chief emerging
markets economist at Capital Economics, a research firm.
Brazil
is in its longest recession since the 1930s. Inflation has spiked up, consumer
confidence has plummeted and a massive corruption scandal continues to engulf public officials two
years since it first began. The bad news doesn't stop there.
Related: Brazil recession: I've never
seen anything like this - On
Tuesday, government officials announced that unemployment in Brazil had shot up
to 11.2% in the period between April and February. There are 11.4 million
unemployed Brazilians, up nearly 20% from a year ago.
Brazil's
recession began at the beginning of 2015 as prices of commodities -- its main
engine of growth -- crashed, and the corruption scandal at the state-run oil
company, Petrobras, engulfed politicians of all stripes and many business
owners.
Put
together -- the political crisis, recession and Zika virus -- have raised concerns about Rio's
readiness to host the games. So far, Olympics officials say facilities are
nearly all done and express confidence that it will be a successful Olympic
games.
Still,
the political crisis will stand in contrast to any Olympic cheers heard in Rio.
Temer, the interim president, has already hit road blocks. Three weeks into
office, two of Temer's ministers have resigned due to corruption accusations.
On
Sunday, leaked phone call recordings showed Temer's new Transparency Minister
-- who was appointed to combat corruption -- advising a senator on how to dodge
a corruption probe. The minister, Fabiano Silveira, resigned Monday. Planning
Minister Romer Juca stepped down last week when recordings showed he was
attempting to obstruct a federal investigation.
Political
turmoil won't help Brazil battle a tough global economy. Commodity prices
remain low as China, a major importer of commodities, is still in the midst of
a slowdown. Brazil has greatly increased its dependence on China as a trade
partner.
Brazil's central bank estimated in March that the economy
would shrink 3.5% for all of this year. Last year, Brazil's economy contracted by 3.8%.
http://money.cnn.com/2016/06/01/news/economy/brazil-recession-economy/
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