The Brazilian Economy has Yet to Bottom Out
The Brazilian economy is like a rotting corpse. Everyone knows it is dead and everyone can smell its decomposing remains from far away.
The only reason why the economy in Brazil has not totally imploded is due to the same reason other large economies in the western world have not collapsed.
Governments have been resourcing to perpetual indebtedness and out of control money printing to cope with the weakening economic activity and, due to the awful management of public funds by the bureaucracy, public servants have had to dig deep into its savings to keep the ship afloat.
In the case of Brazil is different from other western nations. Brazil’s pockets are not as deep as say Germany’s, which means that the cash cow is milked more often to attempt to collect more Reais to face the crisis.
Brazil’s taxes on basic products such as food and energy have been increased exponentially in 2015, and the government has approved more tax hikes for January 2016.
Tax increases and growing inflation arrived accompanied by a downgrade in Brazil’s credit-worthiness, which means that the country’s debt is more expensive to pay and that creditors will be less likely to open their pockets to the Rousseff government.
Different from what is reported by mainstream media, Brazil is not in a recession, but in a depression.
Gross domestic product is contracting at an average annual rate of 4.5%.
Brazil is increasingly sinking into a depression that seems to have no end.
In one year, the country, which a decade ago amazed the world with stratospheric figures, has plummeted further into the abyss with no hope for improvement.
It is the most violent relapse of the past 20 years.
Some analysts suggest that is poised to be the worst economic downturn in 80 years.
Nothing escapes the sinking economy. Household consumption, one of the engines of the happy years of that the country enjoyed prior to the crisis, has taken a dive in just two years.
Nobody trusts, nobody buys and nobody sells. Especially as the unemployment rate, the other horseman of the Brazilian apocalypse, has reached 8% -according to official numbers-.
Agriculture, which usually was an indestructible parallel market is also suffering, due in part to lower demand for soybeans from China.
Not even exports, which in theory has benefited from the devaluation of the Real currency in recent months, has overcome the economic collapse.
Infrastructure construction also continues to fall at a rate of 6.3%.
The latter is explained not only by the gloomy economic environment, but also by the fact that the owners of the largest construction companies in the country are in prison, accused of bribing employees of the Petrobras scandal.
On Friday, the president of the construction company Andrade Gutierrez, Otavio Marques de Azevedo, reached an agreement with the Brazilian attorney to make his life easier.
Marques paid 1 billion reais, the largest fine in the history of the country to avoid been properly judged in court and sentenced to prison.
Marques was caught paying bribes to win bids contracts that allowed the company to build three football stadiums for the World Cup in 2014 as well as railways and refineries, among other things.
He also agreed to denounce others involved in the scandal. Two Brazilian Senators are said to have been named by Marques.
Marques struck a deal with the prosecution so he can be set free from jail. One of the conditions of the deal is that he wears an electronic bracelet to be reachable. His company will also be able to participate in public bids.
Marques’ situation is only comparable to Florentino Perez in Spain. A few months ago the directors of the company Camargo Correa, after also agreed to pay a fine of 800 million Reais to obtain similar benefits.
One Brazilian personality who is still in jail is Marcelo Odebrecht, the owner of the largest construction company in the country. Many wonder how soon he will benefit from the same conditions than his competitors.
Last week, police also arrested one of the richest men in the country, the banker André Esteves, who was also involved in the Petrobras corruption scandal. He is accused of trying to hinder the work of the justice system.
On Sunday, the prosecution decided, in view of the evidence, not to grant parole.
Both Esteves and Marques de Azevedo were examples of successful Brazilian entrepreneurs who enjoyed news coverage in prestigious newspapers and other mainstream media.
All of the illegal activity together with the fact that these criminals have managed to avoid jail has further deteriorated and discredit the image of the Brazilian elite, including politicians and businessmen.
The average Joe in Brazil is not able to discern where the Petrobras corruption well ends, which directly affects the economy.
In fact, the vicious circle of corruption revelations that led to a political crisis also feeds the economic crisis.
The weakened government of Dilma Rousseff, has not managed to negotiate with Congress the passage of new austerity measures which the government says is necessary to improve the economy, but that in reality is nothing less than Greek-style economics.
Given the poor state of the public accounts, Rousseff decided on Friday to suddenly freeze state spending by blocking 10 billion Reais from government spending.
On Sunday, a new poll revealed that for the first time in its history, the main problem that haunts Brazil is neither health nor education nor the insecurity, nor the dire state of its economy.
The cancer that is still gnawing the corpse is Corruption.