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Uncertain economic outlook for Brazil

A White Clarke Group report just published points to some of the problems now facing Brazil, as the euphoria of the World Cup fades. This event, it says, diverted attention from a rather less attractive reality. Brazil is one of the original BRIC group of newly advanced economies tipped − with Russia, India and China – to become the new global drivers that would soon catch, if not overtake, the established developed nations. And, as with its fellow BRICs, Brazil did not suffer as much as the developed economies from the juddering financial crisis.
Brazil, which has been particularly affected by the fall in demand
for commodities from China as its growth rate has cooled. What recovery there has been, says the report, remains uneven. Government policy has been to promote private consumption amongst the expanding middle classes, helped by cheap loans, although this has done nothing to increase the low level of saving. Businesses have also been encouraged to spend through having access to favourable loan rates, but stifling tax regulations have led to commercial investment stagnating and there is little chance of seeing any much-needed adjustments to fiscal policy until after the October 2014 presidential election.
President Dilma Rousseff’s re-election campaign, rocked by recent civil
unrest over poor transportation, health and education provision, and a
heavy tax burden, suffered a further setback in late March 2014, when
rating agency Standard & Poor’s (S&P) downgraded Brazil’s long-term
sovereign debt rating from BBB to BBB-, its lowest investment-grade rating.
 
To read the full report on the Asset Finance International website, click here. 11/08/2014  |  Tim Harrup


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