Has anyone thought to contact the Masters of the Universe and get their sage advice?
1
A perfect example of what happened and how things work in Brasil look no further than the rise and fall of Eike Batista, once the richest man in Brasil. He grew his fortune in mining with the help of his father who was in charge of mining for the government. He parlayed his fortune to go into other businesses like oil. Went on 60 minutes and told everybody that Brasil had finally arrived and that the richest man of the time, Carlos Slim, had better watch out bc he was going to overtake him. With too much confidence in his country and himself (hubris), he overextended himself and lost over $30 billion in a year's time and now is a negative billionaire.
2
Perhaps it went wrong when the Brazilian government instituted the Bolsa (I think its called) or family allowance.
1
Well Gee big government and large borrowing does not work. Powerful governments create corruption. Any lessons here for say Democrats???
5
vulcanalex - Please do not attempt to cloud the issue with facts.
You didn't even mention the money wasted on the Olympics!!!
4
@Doug:
Stolen, not wasted.
Stolen. From Brazilian taxpayers (and, presumably, bondholders, after Brazil defaults on its debt, again).
Stolen, not wasted.
Stolen. From Brazilian taxpayers (and, presumably, bondholders, after Brazil defaults on its debt, again).
7
It's a crisis "made on Worker's Party", the worst government Brazil ever had. Corruption, lies and incompetence all walk together in the Worker's Party.
2
I first visited Brazil in 1966, and bought a small piece of property near the sea. After oil was discovered the value increased 10-20-30-50X and we became a target. It was when I attempted to defend my title/deed and force land poachers off that I discovered just how corrupt the judicial process was from local to state level and finally the courts. I really don't believe anyone can start a business or prosper without paying off. The incredible amount of money swindled from Petrobras is just the tip of the iceberg. President Rousseff should turn that pointed finger toward herself.
10
Democracy is NOT contingent upon capitalism. Growth in the economy is not an indicator that social justice and inequality is being dealt with.
The hard lesson many Latin American nations are learning in this era is that a larger trade portfolio, and increase in exports/production, does not mean political freedom. Being tied to the global economy makes slaves of millions, so much so that China can cut spending and it will create poverty half a world away.
Brazil is learning, painfully, that simply tossing bread at the poor won't fix any of its social issues - just because people vote with their stomachs doesn't mean they're not thinking.
The hard lesson many Latin American nations are learning in this era is that a larger trade portfolio, and increase in exports/production, does not mean political freedom. Being tied to the global economy makes slaves of millions, so much so that China can cut spending and it will create poverty half a world away.
Brazil is learning, painfully, that simply tossing bread at the poor won't fix any of its social issues - just because people vote with their stomachs doesn't mean they're not thinking.
7
Or better yet stated you can only bribe the people so far before the bill comes due. The so called "social justice" is basically impossible. Justice required objective laws to be enforced. My idea of social justice is having a free market, others probably disagree.
1
Corruption, lies, arrogance, massive poverty and absence of the basic rule of law.
2
But, there is always the "jeitinho." Could never ever figure out in the 90's exactly what it was and how "jeito" worked and why it was such a flip, but common, response to how things were going to get fixed. I saw it as a shrug at problems no one knew or wanted to fix.
1
This is a crisis that reveals the fundamental structure of Brazil--it has one of the highest ratios of inequality in the world and a major reliance on deforestation and extractive capitalism with corruption at every political level in Brazil. Lula and Dilma helped the very poor through the bolsa familia program but never dealt with corruption, criminal justice, economic equality.
In addition Brazilian government subsidized wasteful extravagant industries, like Petrobras, and refused to invest in public infrastructure like sewers, schools, clinics, buses, and highways. There is no easy way forward for Brazil but reforming internally starting with punishing corruption, but then working on economic equality, fair criminal justice and taxing the rich.
In addition Brazilian government subsidized wasteful extravagant industries, like Petrobras, and refused to invest in public infrastructure like sewers, schools, clinics, buses, and highways. There is no easy way forward for Brazil but reforming internally starting with punishing corruption, but then working on economic equality, fair criminal justice and taxing the rich.
9
That's cause Dilma and Lula were all in on the corruption. Lula owns most of his home state now.
4
Are you talking about Brazil or the USA? I have been warning people that the United States is heading the way of Brazil. One may say that there isn't corruption in the US but all one has to do is look at how much money people need to spend to get into office. Nothing is for free. No one give money without having a motive.
6
Or the mostly consistently enforced rule of law. Well your idea of "taxing the rich" is foolish. The truly rich will not allow their wealth to be stolen. Economic equality?? How about economic opportunity, equality is impossible.
1
The US is going to be facing the same crisis after 6 years of massive government borrowing which made it appear that the economy was growing at a 2 percent rate when it was in fact shrinking. When you net out the massive amount of debt that the Obama administration has put on every American, the economy has shrunk. Meanwhile, you have the Clinton crime syndicate collecting 150 million selling access to the US government -- not unlike the corruption in Brazil.
10
Are you aware government spending has fallen under Obama? If so, you are more informed than Rand Paul.
2
Federal fiscal deficits have shrunk recently under Obama, but not total spending and alas, deficits as a percentage of GDP ( ~ 3+ % ) are greater than growth of GDP ( ~ 2.5+ % ) ... Place your bets, ladies and gentlemen, place your bets.
1
To what measures (%,$, base, direct, indirect, etc.) are you referring? What period of time? Thanks.
1
Three billion in bribes? Retirement at 52? Keeping billions in US Treaury notes? Why the latter? Could our aid for their off shore energy developments be linked? Nah, not a chance. Surely Brazil will turn itself around, or will it or as some note in the comment section, can they?
Life spans are lengthening while some countries seem to think that they can keep systems that were built at a time when life after retirement ((SS here, 65, life expectancy, 65.)) has greatly outpaced the system.
Are there a few lessons here for US? Can we afford to maintain a system which yearly seems to promise more and more years of support for our aging population. Perhaps, but the odds are against it.
Life spans are lengthening while some countries seem to think that they can keep systems that were built at a time when life after retirement ((SS here, 65, life expectancy, 65.)) has greatly outpaced the system.
Are there a few lessons here for US? Can we afford to maintain a system which yearly seems to promise more and more years of support for our aging population. Perhaps, but the odds are against it.
4
A vain capitalist attack upon a valiant country and a valiant leader.
Brazil's economy and it's people are strong. We will see what happens, ignoring the "bad" foreign press.
Brazil's economy and it's people are strong. We will see what happens, ignoring the "bad" foreign press.
1
Left wing economic policies only work in the best of times. Slowdowns are inevitable though so you have to plan properly and be willing to take your medicine. Hopefully they will learn their lesson (though many here don't realize it either).
That said - the Brazilian people are great and the country is gorgeous... I hope they get themselves onto solid footing. In reality they have a larger under class than the U.S. because they had a much larger slave trade... Which left an even bigger mess of generations unprepared to make meaningful contributions.
That said - the Brazilian people are great and the country is gorgeous... I hope they get themselves onto solid footing. In reality they have a larger under class than the U.S. because they had a much larger slave trade... Which left an even bigger mess of generations unprepared to make meaningful contributions.
10
Brazil's monetary approach was not the problem; it has worked in the US, in the UK, in Europe, and elsewhere. The problem's are 1) the grotesque and metastasizing corruption at the highest levels of certain state and private corporations (Petrobras, Odebrecht), which have even snared officials in other countries (like Dominican Republic, etc.), and which have siphoned off vital resources for BRAZIL's development; 2) the recent increase in inflation, coupled with the new lower middle-class's credit crisis, which means a lack of consumption; 3) the price controls on gas and electricity, which have badly harmed the energy companies' bottom lines, further damaging that sector and Brazil's overall economy; and 4) Brazil's attempts to become the USA of the southern hemisphere with its development bank, which has given private corporations taxpayer dollars' at a loss, further impoverishing Brazil's treasury and harming the economy.
There are clear ways out of this mess. Addressing each of the above issues is key. The question is: can Dilma undertake them in her precarious political state? Or will Brazilians allow someone from the Right to take over, and take Brazil back to an even worse state as was the case when José Sarney or impeached former President Collor de Mello were running Brazil...into the ground?
There are clear ways out of this mess. Addressing each of the above issues is key. The question is: can Dilma undertake them in her precarious political state? Or will Brazilians allow someone from the Right to take over, and take Brazil back to an even worse state as was the case when José Sarney or impeached former President Collor de Mello were running Brazil...into the ground?
6
Of course this was all well known by the President well before the last election. Of course, it is all due to the leadership, not the people!
Lot's of people knew what was happening. Lots of people benefited from it. Brazil is getting what it is due.
Feel sorry for the people? They are the ones who benefited and elected the current leadership.
Lot's of people knew what was happening. Lots of people benefited from it. Brazil is getting what it is due.
Feel sorry for the people? They are the ones who benefited and elected the current leadership.
6
There is the impression that there is a certain amount of corruption that is acceptable, but when it gets to be too much it is addressed--like when Collar had to resign. He was said to "have taken too much." What was it? US$14 million? Therefore, he had to go.
Sounds like big govt.Same problem we have.Eventually,the world will figure out,we aren't as great as our salesmen(AKA politicians) promise.
1
As roots-in-his-blood musical wizard Raimundo Sodré -- who rocketed to fame in Brazil-under-dictatorship in 1980 only to wind up in exile with his career crushed -- said: Onde tem miséria, tem música!
He was talking about New Orleans, Harlem, the south side of Chicago, and of course, Brazil. The way things are going, there's a lot more coming...
www.salvadorcentral.com/codex/profile/raimundosodre
He was talking about New Orleans, Harlem, the south side of Chicago, and of course, Brazil. The way things are going, there's a lot more coming...
www.salvadorcentral.com/codex/profile/raimundosodre
3
So, basically, Greece...
8
No, not Greece at all. The geography, the demography, the resources, the economies, the governments, the people, the history and the corruption are all very different. Both are in huge trouble, but not the same.
5
Greed causes oscillations. Always has, always will.
Plus a good sized helping of stupid.
Plus a good sized helping of stupid.
5
and corruption, it always hits the little guy the heaviest.
2
What is this happening in Brazil is the engine of big government has a political crisis an end to corruption in Brazil
2
Can't happen as in other Latin countries, the governments are the most corrupt, taking everything and giving back very little. It is a way of life.
3
Ms. Rouseff has run the country into the ground. She lies often and is manipulated by her predecessor, Lula da Silva, who helped her win elections and "save his seat" until he can run again. Their party wants to stay in power as long as it can while corruption is rampant in so many areas we all loose track of the many billions stolen. It is a truly sad situation when a country on a budget shortfall maintains 39 (read thirty-nine) ministers, and instead of cutting off the fat the president wants to raise even more taxes which are already one of the highest in the world.
11
"Moreover, programs in which the government pays monthly cash stipends to the poor, a central pillar of declining inequality since the Workers’ Party gained the presidency in 2003, do not seem to be at risk. Even Ms. Rousseff’s opponents acknowledge that such programs are a relatively cheap way to combat extreme poverty, effectively assuring their continuity."
So they can continue to buy support from the poor through long term unaffordable redistribution, another example of the leftist inspired failed policies.
So they can continue to buy support from the poor through long term unaffordable redistribution, another example of the leftist inspired failed policies.
4
Dilma rode in on the coattails of Da Silva, that was understandable. That she was recently reelected when the economic warning signs had become evident, not to mention the Petro-scandal is in large part due to the handouts to the poor whos votes she is simply buying.
I am not convinced she and her team can navigate their way out of this.
I am not convinced she and her team can navigate their way out of this.
8
A rule of thumb is never let your population growth exceed your capacity for production or means of distribution. The first step in economic stability is population control.
8
There is no such rule of thumb. Even China's draconian population control program was not based on economic projections.
1
He said "never let population exceed capability to produce". i.e., avoid the Malthusian forecast.
1
Apart from the very costly Petrobras bribery scandal, there should be some lessons here for the US.
One thing we might note is that some of our politicians are speaking a lot about income inequality in the US, but Brazil did something about it by giving stipends to lower income people. Despite the current problems, these Brazilian stipends are apparently not in jeopardy.
Unfortunately, it is stories like this that underscore that there is no such thing as a free lunch, regardless of how much politicians try to persuade us that they have finally discovered a foolproof way to do so.
One thing we might note is that some of our politicians are speaking a lot about income inequality in the US, but Brazil did something about it by giving stipends to lower income people. Despite the current problems, these Brazilian stipends are apparently not in jeopardy.
Unfortunately, it is stories like this that underscore that there is no such thing as a free lunch, regardless of how much politicians try to persuade us that they have finally discovered a foolproof way to do so.
3
The crisis goes deeper than the media usually reports it. As a well-educated Brazilian, I am planning to get my PhD in the US and stay there afterword. All my friends that have at least a STEM master’s degree are moving to other countries such as Canada and Australia. Entrepreneurs are leaving the country to start businesses in the USA instead of creating jobs here at home. Brazil is being brain drained and its future looks bleaker than it ever was since the democracy was reestablished.
11
How did "IT" all go wrong? Simple: Incompetence, Inane Bureaucracy and Massive Corruption coupled with a lack of Transparency...
17
Don't forget a large helping of MarXist 'economic' ideas. Always a recipe for disaster.
7
As always and everywhere: It's a people (government) inflicted problem. Clueless populist politicians who don't know how to run a country, but who like to stay in power; i.e. love the limelight and the whole shebang that goes with it at the expense of the country and its people.
13
I returned recently from Brazil. One cannot look down from a plane at night at the lights of Rio without thinking that here is a giant, if not sleeping, then perhaps blinking in the cold light of day, but a giant still. The poor are legion, but they are hustling, occupying every available square inch of public space to offer some kind of good or service. The professional class is educated and competent, one that seems to be more heavily filled by women than is typical, who themselves seem to be especially confident and ready for change. And while the government reels under systemic corruption, the judicial and prosecutorial system is remarkably incorrupt, and working sedulously. The task is Herculean certainly, but not Sisyphean. In three years Brazil will bustle bustle with a new strength and vigor. They should have all of our faith and good will in that future success.
25
I lived there in the late '80s and '90s. Your assessments of the people, the culture and the resources closely resemble mine. However, when even the most common person thinks that the solution to any problem is a bribe, I don't have confidence that the current problems will be fixed in 3 years or 10. Brasil is a magnificent country, the professional class is excellent, and the people are some of the most loving in the world, but I think that making the cultural changes needed to make the country function will be very difficult.
3
Taking a look at just this one paragraph, "Ms. Rousseff pressured the central bank to reduce interest rates, fueling a credit spree among overstretched consumers who are now struggling to repay loans. She cut taxes for certain domestic industries and imposed price controls on gasoline and electricity, creating huge losses at public energy companies." I have to ask, is this her fault or is it in the banks interest to limit their customers access to credit at the same time really the blame. I suspect it is also not her fault but corporations intentional attempt to stifle those same reforms that is the problem. Austerity doesn't work and those moaning have followed a reckless policy for long before she came to power.
2
What a surprise that a Massachusetts person defends a leader proven to be a totally incompetent radical left wing populist.
2
I have Brazilians who work for me. Just yesterday they expressed fear that a civil revolution will start in their country. They said that the drug cartels run most of the country outside of the big cities and that the citizens are armed to protect themselves against the cartels and the government. They are worried about their loved ones still in Brazil., and worried about Brazil's economy. It seems that all the progress that was made in the last two decades may evaporate and be shown to be merely smoke and mirrors.
13
A civil revolution ? this never will occurs in this country. we are extremely cowards to fight against our oppressors.
8
The crisis is also impacting Brazil's role as a founding member of the United Nations. Brazil media has reported that the Dilma government is in arrears upwards of $250 million to the UN. Itamaraty, the ministry for external relations in Brasilia, has been hit by budget cuts and is dancing around the UN debt issue. Meanwhile the Dilma government gets tremendous "brand equity" from associating itself with UN organizations like UNESCO, the World Health Organization and the International Atomic Energy Agency.
Because of its debt to the UN, Brazil can no longer command (but can still participate in) UN peacekeeping (blue helmet) operations.
Brazil's economic crisis and its UN debt create a credibility gap for president Dilma who is expected to call for a the inclusion of more developing economies on the UN Security Council when she addresses the General Assembly later this month.
Brazil, for reasons unrelated to its UN debt, is no longer a non-permanent member of the UN Security Council.
Because of its debt to the UN, Brazil can no longer command (but can still participate in) UN peacekeeping (blue helmet) operations.
Brazil's economic crisis and its UN debt create a credibility gap for president Dilma who is expected to call for a the inclusion of more developing economies on the UN Security Council when she addresses the General Assembly later this month.
Brazil, for reasons unrelated to its UN debt, is no longer a non-permanent member of the UN Security Council.
4
It's always amusing to read the comment section when articles like this come out -- they read as a satire of a leftist college magazine. Yes, the problem here is "capitalism" -- rather than, say, cronyism, economic mismanagement, an unbalanced sectoral economy, and government control of banking and energy.
25
Now that at least three of the four BRIC countries - Brazil, Russia and China - are experiencing significant structural and economic problems (and India has its own set of problems), this is the time that they should all clean house and try to get rid of the endemic corruption and cronyism as much as possible. The question is, can they?
13
That can never happen as the most corrupt are precisely those in control, pulling the strings of government and they will not vote to hurt themselves. Endemic in all the Latin and other third world countries.
4
Can they? Yes. Will they? Not a chance.
7
India has significant structural problems as well. It's actual growth has lagged below what economists have projected as its inherent growth capacity for several years now. India's problems are of a different sort than its B, R, or C brethren -- more to do with inefficiency and political logjam -- but it has its own structural problems for sure.
1
Cronyism, corruption, malfeasance, theft.
In other words, a complete absence of rule-of-law when it comes to its businesses.
Would anybody who hasn’t been living under a rock the past few years ever want to invest in Brazil after the PBR scandal?
In other words, a complete absence of rule-of-law when it comes to its businesses.
Would anybody who hasn’t been living under a rock the past few years ever want to invest in Brazil after the PBR scandal?
8
I am Brazilian and had never seen or studied a crisis of this level ... The politicians so that Brazilians want to steal the country and the population. I have no hope that we can get out of this chaotic recession. I need to know what I and my family are we going to leave that country. It was a country so good, this woman and her Communist Party tried to establish an ideology like in Venezuela. We are living in chaos
1
After the global bank collapse of 2008, loss of demand for commodities, hot spot deflationary pressures, currency wars, and tepid global growth, how can anyone "blame" a national collapse on one leader?
These are perilous times. If anything can be learned from Brazil, it's that you can seemingly have it all, build it over years, and it can all be lost in a blink. Equities can lose years of gains in one single day. Americans have experienced such shocks many times before, including recently, and will again. We didn't experience our shocks under a "former Marxist" either, but instead under right wing, laissez faire leaders.
All leaders are susceptible to these global economic dislocations, excessive risk, excessive leverage and sloppy government responses. We have bigger lessons to learn beyond pointing fingers at individual national leaders.
These are perilous times. If anything can be learned from Brazil, it's that you can seemingly have it all, build it over years, and it can all be lost in a blink. Equities can lose years of gains in one single day. Americans have experienced such shocks many times before, including recently, and will again. We didn't experience our shocks under a "former Marxist" either, but instead under right wing, laissez faire leaders.
All leaders are susceptible to these global economic dislocations, excessive risk, excessive leverage and sloppy government responses. We have bigger lessons to learn beyond pointing fingers at individual national leaders.
2
It's just Paul Krugmanism, after all. Keep borrowing and spending, no matter what. Never tighten the belt at any downturn at all. Any time the train slows down, even a little bit, keep shoveling in the coal.
10
The measures Rousseff took such as cutting the interest rates, cutting taxes on industries, and putting price controls on energy are not things Krugman has ever recommended. Neither are corruption and incompetence. Direct spending to alleviate poverty is one of the few things that has worked. I wouldn't feel too much schadenfreude, if I were you.
1
The global invisible hand strikes again. How dare they try a different approach?
1
There was a giant construction bubble in China that caused a giant bubble in the price of iron ore, and Brazil spent the money on useless soccer stadiums, pensions, and Bolsa Familia welfare payments rather than electricity, hydropower, road, and rail infrastructure needed to support industry and bring agricultural products to port. As a result, the adjustment will involve some pain. Even so, the adjustment can be very manageable if non-infrastructure spending of the government is cut in line with the drop in exports. But can the government find the political will to do that? If it does not, inflation indexation of government pensions and welfare payments will cause an inflationary spiral that will kill new business investment and leave Brazil poorer.
7
Almost exactly the same thing is happening in South Africa, another beleaguered member of the BRICS coalition. Here too is a country that is far too reliant on natural resources, and saddled with a scandal-plagued government that is seemingly incapable of developing strategies for boosting economic growth and creating jobs. In many cases, they are working against the economy, recently passing laws that make it harder to international tourists to visit, seriously hobbling one of the few industries with growth potential. Oddly enough, the South African people are much more complacent when it comes to their government's inept fumbling. Whereas local protests against a lack of 'service delivery' are common there is yet to be a mass movement for change. That may happen on September 30th, when a nation-wide anti-corruption march is planned. It will be interesting to see what the response is.
2
Does Brazil actually produce any manufactured goods that Europe and the US want to buy? I don't think so. If not, they are essentially a commodity supplier to the rest of the world, so they should recover whenever oil gets back above 100 dollars.
3
Airplanes for one. Ever hear of company calle Embraer? But yes, in the last 15 years they have become a commodity majority economy. At that is the real tragedy of the last 10 years of these foolish and greedy politicians. According to the article, in 2000 65% of the economy was manufacturing. Now it is 45%.
2
How about airplanes? Embraer is the 3rd largest producer of passenger airplanes in the world.
2
Also shows the size of the Feds money printing. A ton went to Brazil and Australia only to be now leaving to come back to the US. Not fair for them. Now we can only hope that China dumps US Treasuries at the exact rate that this printed money comes home. Then we will end up perfect again leaving a trainwreck of the emerging economies, the Chinese kleptocrats owning half of the nicest real estate in the west ,and the Chinese masses once again toiling for peanuts and the US unemployed.
All because we could not do tariffs on China and put checks and balances on Wall street!
All because we could not do tariffs on China and put checks and balances on Wall street!
3
As the saying goes, one should not waste a major economic crises.
Brazil, a naturally very rich country, is cursed with serious structural problems. Its tax system is worse than Byzantine, the government inserts itself in far too many day to day decisions, the transportation system is woefully inadequate, etc. All of these problems are solvable, but the political will to enact straightforward reforms still doesn’t exist.
Finance Minister Levy is a competent economist & is becoming a decent politician. Dilma & her party must support him in his efforts to push reforms thru a Congress every bit as corrupt & driven by special interests as is ours. So should every patriotic Brazilian. The country’s wealth has not gone away, it’s just the barriers to the efficient use of these riches that must be removed.
Brazil, a naturally very rich country, is cursed with serious structural problems. Its tax system is worse than Byzantine, the government inserts itself in far too many day to day decisions, the transportation system is woefully inadequate, etc. All of these problems are solvable, but the political will to enact straightforward reforms still doesn’t exist.
Finance Minister Levy is a competent economist & is becoming a decent politician. Dilma & her party must support him in his efforts to push reforms thru a Congress every bit as corrupt & driven by special interests as is ours. So should every patriotic Brazilian. The country’s wealth has not gone away, it’s just the barriers to the efficient use of these riches that must be removed.
44
Brazil, land of the future.
Thank God some of us live in the present.
Thank God some of us live in the present.
2
That is saying Brazil's problems are almost all political which they definitely are not. Energy is a good example where it does not matter how many barriers to efficient use of recently discovered oil reserves are removed; Brazil is subject to the global economics of oil. It does not help, to say the least, that the political and business sector continues to engage in corruption, mismanagement and magical thinking,
1
Nothing but a tragedy foretold. The campaign of lies reelection added stubbornness showed its face and now comes despair.
The President Diilma is totally discredited their supposed leaders in Congress are lost and she unmet have the courage to ask, via Minister Levy, sacrifices society as if not enough 37% of the tax burden with public shoddy services and when has.
Although it was no surprise but a matter of time, the decision of Standard & Poor's has served to formalize the markets even guarded the terrible situation of our economy starting with the debt to which add up to 70% of revulsion to the government and the eminent request of impeached.
The President Diilma is totally discredited their supposed leaders in Congress are lost and she unmet have the courage to ask, via Minister Levy, sacrifices society as if not enough 37% of the tax burden with public shoddy services and when has.
Although it was no surprise but a matter of time, the decision of Standard & Poor's has served to formalize the markets even guarded the terrible situation of our economy starting with the debt to which add up to 70% of revulsion to the government and the eminent request of impeached.
2
A lot of Americans are going to be completely blindsided by the consequences of this.
Without minimizing the mistakes of the Brazilian government, the bubble conditions were generated largely by first world central banks flooding the world with QE vapor money and actively penalizing saving in favor of indebtedness.
Petrobras alone sold something like US$180 billion in bonds post-2008, when the real was strong and oil was at $100 a barrel. What are the chances of them being able to repay when oil is at $40-50 and the real has tanked?
With 75% of its debt in dollars are bond defaults anything but a matter of time? And who is actually holding that and other "emerging market" debt?
A lot of it is in mutual funds and pension funds, directly or indirectly - these are vulnerable to a runs on their as NYT recently reported on:
http://www.nytimes.com/2015/08/23/business/vague-disclosures-by-highflyi...
Ignorance can be blissful, but it can turn nightmarish in a hurry.
Boa sorte, Brasil - you have a lot of strengths, at least you are not having to pay for continuous wars and a surveillance state, a couple big advantages over the US...
Without minimizing the mistakes of the Brazilian government, the bubble conditions were generated largely by first world central banks flooding the world with QE vapor money and actively penalizing saving in favor of indebtedness.
Petrobras alone sold something like US$180 billion in bonds post-2008, when the real was strong and oil was at $100 a barrel. What are the chances of them being able to repay when oil is at $40-50 and the real has tanked?
With 75% of its debt in dollars are bond defaults anything but a matter of time? And who is actually holding that and other "emerging market" debt?
A lot of it is in mutual funds and pension funds, directly or indirectly - these are vulnerable to a runs on their as NYT recently reported on:
http://www.nytimes.com/2015/08/23/business/vague-disclosures-by-highflyi...
Ignorance can be blissful, but it can turn nightmarish in a hurry.
Boa sorte, Brasil - you have a lot of strengths, at least you are not having to pay for continuous wars and a surveillance state, a couple big advantages over the US...
17
So the European welfare model is near bankruptcy while heavy state intervention has brought the Chinese and Brazilian economies to a standstill. Yet those in the US who advocate higher taxes and a bigger government role in the economy seem to be rising in popularity. Do Bernie Sanders and his ilk not understand that socialism is the surest route to national stagnation and bankruptcy? Have they learned nothing from history?
16
Have conservatives who sold us the bill-of-goods called "trickle-down economics" learned nothing from history? Thanks to Reagan and his ilk and their power to intimidate any opponents to their cause to "drown government in a bathtub", our once solid middle class has seen no economic gains in the past thirty years, poverty is up, and yet, lo and behold, the rich--the super one-tenth of one percent--is better off than ever. The CEO-to-worker pay gap is wider than ever. Many of the Fortune 100 companies pay no corporate income taxes, and yet are rewarded for shifting jobs overseas. Yes, we certainly better learn from history.
5
Compare the budgets of California and Minnesota to Kansas and Wisconsin. Then come back with this nonsense.
Socialism is great until you run out of other peoples' money.
34
Socialism is working quite well in Germany. No form of government does well when there is rampant corruption and incompetence.
SherlockM, Germany is not a socialist state. The government does not own or otherwise control any significant portion of the nation's economy. The state has a healthy safety net, but it also has a healthy private sector.
What Germany does have is a business sector which actively works with representatives of the work force to craft strategies for private profit-making that benefit management and workers at least somewhat equally. It's akin to the so-called Third Way of political administration which is found in the Scandanavian nations - take the better parts of capitalist and socialist policies, and leave the rest behind.
The American plutocracy is simply too coarse to understand such an approach to industrial policy.
What Germany does have is a business sector which actively works with representatives of the work force to craft strategies for private profit-making that benefit management and workers at least somewhat equally. It's akin to the so-called Third Way of political administration which is found in the Scandanavian nations - take the better parts of capitalist and socialist policies, and leave the rest behind.
The American plutocracy is simply too coarse to understand such an approach to industrial policy.
1
Brazilians and President Dilma Rousseff faces a tough going. The rosary of misery is extensive. Among them:
1. Economy in recession. Unemployment and inflation on the rise. Public finances in shamble and debt getting closer to 70%/GDP. The 2016 budget was sent to Congress with a huge deficit. S&P has downgraded Brazil's credit rating to junk;
2. Revelations from the multi billion money fleecing scheme in Petrobras -- put together by a high ranking Workers Party official -- could lead to Ms. Rousseff's impeachment by Congress. Calls for her removal from power is getting louder each passing day;
3. More worrisome, President Rousseff -- an economist by training -- is totally lost on how to get the economy moving again. Her ideological approach to economic policy is similar to Cristina Kirchner in Argentina.
No attention to macroeconomic imbalances, particularly public spending, debt and exchange rate. Following Krugman's Keynesian advice, Dilma believes public spending is the only way out of a recession.
There is one small problem with the academic approach above. Brazil's treasury issues a currency called Real and not US dollars.
Bottomline: Brazil has been hit by a perfect storm. First, a president without any support in Congress. Her VP belongs to another party PMDB getting ready to take over power, just in case. Second, an economy in recession without a strong political leadership and a capable economic team. What else can go wrong?
1. Economy in recession. Unemployment and inflation on the rise. Public finances in shamble and debt getting closer to 70%/GDP. The 2016 budget was sent to Congress with a huge deficit. S&P has downgraded Brazil's credit rating to junk;
2. Revelations from the multi billion money fleecing scheme in Petrobras -- put together by a high ranking Workers Party official -- could lead to Ms. Rousseff's impeachment by Congress. Calls for her removal from power is getting louder each passing day;
3. More worrisome, President Rousseff -- an economist by training -- is totally lost on how to get the economy moving again. Her ideological approach to economic policy is similar to Cristina Kirchner in Argentina.
No attention to macroeconomic imbalances, particularly public spending, debt and exchange rate. Following Krugman's Keynesian advice, Dilma believes public spending is the only way out of a recession.
There is one small problem with the academic approach above. Brazil's treasury issues a currency called Real and not US dollars.
Bottomline: Brazil has been hit by a perfect storm. First, a president without any support in Congress. Her VP belongs to another party PMDB getting ready to take over power, just in case. Second, an economy in recession without a strong political leadership and a capable economic team. What else can go wrong?
24
Back in 2002, when Lula was elected, and the economy was just barely recovering after the 1999 devaluation, the dollar went from 2.0 to 4.0 because no one trusted Lula to continue the successful policies FHC had inaugurated. But Lula then confounded his critics by continuing them, and the country continued to grow. In 2008, for all the wrong reasons, Brazil's economy continued to grow notwithstanding the global recession.
But 2015 is different.
No one trusts President Dilma. She hasn't a clue as to what to do, other than to mouth platitudes about "we'll recover" and "Brazil is ok". She appointed a Chicago School Finance Minister and then cast him to the Congressional Lions, who won't (a) raise taxes; or (b) reduce expenditures, because those are unpopular with voters. Then, even after he had some support, she chopped him off at the knees, denying any austerity moves. "We've already cut enough" she lied. But after S+P reduced Brazil to the rubbish heap below Russia, she changed her tune to say "we'll cut more".
No, she won't.
And even if she tries, Congress won't let her.
Brazil is snookered.
It's a shame.
But 2015 is different.
No one trusts President Dilma. She hasn't a clue as to what to do, other than to mouth platitudes about "we'll recover" and "Brazil is ok". She appointed a Chicago School Finance Minister and then cast him to the Congressional Lions, who won't (a) raise taxes; or (b) reduce expenditures, because those are unpopular with voters. Then, even after he had some support, she chopped him off at the knees, denying any austerity moves. "We've already cut enough" she lied. But after S+P reduced Brazil to the rubbish heap below Russia, she changed her tune to say "we'll cut more".
No, she won't.
And even if she tries, Congress won't let her.
Brazil is snookered.
It's a shame.
33
It fails the way its always fails.
"Growth for the sake of growth is the ideology of a cancer cell."
Edward Abbey
"Growth for the sake of growth is the ideology of a cancer cell."
Edward Abbey
71
Sadly Brazil has not learned from the large number of failures of other countries around the world. When politicians and bureaucrats fail to show discipline with economic policy we see a repeat of the same situation again and again. Instead of finding out the true drivers of the economic engine and managing them well they end up going on unsustainable spending sprees in the name of social improvement. The greatest social improvement a government can do is to properly incentivize and regulate business, while being a strong steward of the country's finances and growth. Instead they end up trying to milk businesses for more money sapping them of incentives and growth to fuel their spending sprees and agendas. Bring in banks and businesses which report directly to the leaders of the country and you have a recipe for disaster. It may seem trite, but it sounds like all leaders of emerging economies should be asked to take an Econ 101 class, or at least a few lectures on history. That probably is time better spent that what they seem to get up to these days.
33
why only emerging economies...even the developed world starting with greece and others in the eu need to join in this class and yes of course it may not be too early for the middle east including the uae to be a part of this class with the way the oil price is going in reversal
What observers should ask is: Did Brazil do anything to stabilize its future?
The article mentions that it built sizable currency reserves. It also mentions that it improved its infrastructure, developed its energy industry and financial industry. The offshore oil will still be there when it is needed again. These new industries added to the work force skill sets that did not exist in such numbers before the changes. These things will remain AFTER the fallout from the commodity bubble popping ends.
Right now, Brazil is experiencing the growing pains of an economy that has gone through modernization at break neck speed. This has been the story of all the BRICS nations.
The question is whether they can stabilize themselves before they burn up what they have worked to build. I think that in the case of China and Brazil, they will eventually stabilize and return to a more sustainable growth curve.
The article mentions that it built sizable currency reserves. It also mentions that it improved its infrastructure, developed its energy industry and financial industry. The offshore oil will still be there when it is needed again. These new industries added to the work force skill sets that did not exist in such numbers before the changes. These things will remain AFTER the fallout from the commodity bubble popping ends.
Right now, Brazil is experiencing the growing pains of an economy that has gone through modernization at break neck speed. This has been the story of all the BRICS nations.
The question is whether they can stabilize themselves before they burn up what they have worked to build. I think that in the case of China and Brazil, they will eventually stabilize and return to a more sustainable growth curve.
8
It is not true that it improved the country´s infrastructure. Instead of developing electric power sources such as wind, biomass, solar, the country continued to favor fuel sources. Since the beginning of this year we have seen electricity prices raised three times; the government has issued three types of rates, red being the highest, which is the current rate. Instead of spending money on our ports, the president lavished money on Cuba´s port to the tune of billions. Our roads are so bad that truck drivers complain about the number of accidents and even staged a nationwide protest. Brazilian money has gone to Cuba, to Venezuela and to Bolivia. This year, which was supposed to provide a boost to education, has seen major cuts. Corruption is so widespread that we lost track. It is not a case of growing pains at all! It is a question of corruption and incompetence, lack of leadership, wrong political decisions and a country made up of mostly the poor and the uneducated that voted on this current president and its predecessor afraid of loosing a benefit called Bolsa Familia (a family stipend) with which they barely make a living but that it is better than nothing. The rest of the country is paying dearly for the president´s many mistakes.
25
At least they are not paying for serial wars and a surveillance/police state.
Getting rid of the above would be a good start toward stabilizing America's future.
Add the Federal Reserve to the list and our prospects would really be looking up.
Getting rid of the above would be a good start toward stabilizing America's future.
Add the Federal Reserve to the list and our prospects would really be looking up.
4
Our wars are incredibly expensive in any number of ways yet war is hardly a 'last resort' these days.
2
Maybe this is a problem of capitalism. What if this vast nation's resources were focused on improving the lives of the people directly, instead of being part of the international capitalist shell game which is destroying the planet and everyone in it? Maybe there are alternatives? Maybe the crisis is one of business, not of the nation. But we'll never read about it. It's all about interest rates and credit downgrades.
76
Not a capitalism issue at all. It is a problem of rampant government corruption, incompetence, bloated government machine. It is a political crisis, one of the worst the country has ever seen. I live here, I know.
48
The capitalist international shell game as you call it as lifted hundreds of millions of people out of poverty in the past two decades.
17
Well, to run a country's economy thousands and thousands of decisions must be made daily by somebody, either primarily by business on the basis of the market, or by the government on the basis of some economic theory. The Soviet Union is an example of the dismal result of the latter. China in 1980 under Deng Xiaoping, following Singapore and South Korea, abandoned the Soviet model in favor of a mixed market economy, the one used by Europe, Japan, etc. Then the Chinese economy started to perform well, after years of disastrous malfunction (the Great Leap Forward, the Cultural Revolution).
To correct for unfairness in distributing the fruits of a market economy, the people usually elect governments that operate a welfare system along side the business system. Very difficult to get the mix of a mixed economy right, decade after decade. America got it right for many decades following the New Deal of the 1930s, but now many agree it needs reform.
Regarding the environment, democratic countries with mixed economies do best, whereas the old Soviet and current Chinese communist regulations against pollution obtained very poor results.
To correct for unfairness in distributing the fruits of a market economy, the people usually elect governments that operate a welfare system along side the business system. Very difficult to get the mix of a mixed economy right, decade after decade. America got it right for many decades following the New Deal of the 1930s, but now many agree it needs reform.
Regarding the environment, democratic countries with mixed economies do best, whereas the old Soviet and current Chinese communist regulations against pollution obtained very poor results.
1
Brazil is a bubble economy. It has a triple bubble, a property bubble based on a commodities bubble which is itself based on the China bubble. How could it end any other way?
59
All of them interconnected and dependent on the bubblest bubble of all times, the US.
13
It has corruption, corruption and more corruption, an incompetent president, lack of leadership. This is not an economic crisis, it is a political crisis. If you lived here you would know.
15