World Economy

Brazil Economy Reforms at Risk

Brazil Economy Reforms at RiskBrazil Economy Reforms at Risk

Economic austerity reforms meant to put Brazil’s recession-damaged economy back on the rails are in danger now that President Michel Temer is on the verge of being ousted in a corruption scandal, analysts say.

Standard & Poors, the rating agency, reflected the concern on Tuesday by warning it could further lower Brazil’s credit rating due to political uncertainty, AFP reported.

“The economy will be very much affected by the crisis,” said Gesner Oliveira at GO Associados consultants. “It could be the third consecutive year of recession.”

For Temer—accused of corruption and obstruction of justice just as macro-economic signs are improving—last week was simultaneously the “best and worst moment” for his government.

Inflation is steadily dropping and growth is believed to be at the start of a modest recovery, even if unemployment remains dire at nearly 14%. After the economy contracted 7.2% in 2015-16, there are hopes for a renaissance.

Meanwhile, Brazil’s balance of payments closed positive in April, with current accounts totaling $1.153 billion, the best result for the month since 2007. For the country’s central bank not even the latest political turmoil will derail the country’s economic recovery.

“With the event last week, we have increased uncertainties, but the message is that the central bank acts to maintain the smooth functioning of the market,” said Central Bank’s Economic Department Deputy Chief, Fernando Rocha.

According to data released on Tuesday by the entity, the current accounts registered a surplus, influenced by the positive trade surplus for April. In the twelve months ending in April, however, current accounts recorded a deficit of $19.8 billion, equivalent to 1.06% of GDP.


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