Brazil: A Hindered Economy

Donovan Maudsley - 3A Mechanical
Posted on: May 19, 2016

Brazil had been a center of unprecedented economic growth in the last ten years up until 2014. Between 2002 and 2013 the national GDP had grown by an average of 3.6% per year. This even takes into account the slightly negative GDP growth in 2009, immediately after the global financial crisis. Brazil’s economy rebounded the most out of the larger economic powers after the worst of the financial crisis had past. From 2011 till 2014, during President Dilma Rousseff’s first term in office, the economy slowed in comparison to its neighbours and especially compared to those with whom it was competing with in the past decade. Rousseff’s government has greatly increased public spending, and in her re-election year they ran a deficit which was around 6.75% of their GDP. As the government spending has increased  the unemployment rate has dropped, which caused increases in labour rates.

Brazil had many years as a macroeconomic powerhouse, but the government meddled in the nation’s microeconomic sectors. The national infrastructure is also weak, making outside investment unappealing. Investment was also slowed by the strength of their currency. Corporations don’t want to spend more money to make products away from home. A counter example of this is Canada’s film industry, which has been booming since our dollar slipped.

As their finances began to take a turn for the worse, the Brazilian government started to take action. Spending was cut on unemployment insurance and other benefits, taxes have gone up, water rates have increased and so has electricity. These changed have all stoked inflation and hurt disposable incomes. Sadly, the country has had its investment-grade rating revoked by all three of the major rating agencies. The policies put in place by Rouseff’s government are still standing and now are doing more harm than good. Overall it’s not a great place to be in right now.