Brazil's economy has slowed significantly in recent years after a period of strong growth until 2011. GDP growth was barely 0.9% in 2012 and is projected to be around 2.5% for the current year and next. This decline is attributed to factors like the high value of Brazil's currency, stagnating commodity prices, deteriorating infrastructure, social inequality, and declining investment. Credit ratings agencies currently rate Brazil's investment grade as second-lowest and improvements will require long-term reforms by the government. President Dilma Rousseff faces the challenge of accelerating economic growth by reducing the public sector's role and examining the tax system, while also controlling inflation and reducing public debt levels. There is growing social unrest over economic conditions

1. Brazil, “From Pretty Lady to Bygone Girl”
By: Florencia Bunge
Until recently, when one thought about Brazil, three words came to
mind: development, wealth and power. This situation has changed significantly,
as recent events in the Carioca country prove that Brazil’s economy, after steady
growth until 2011, seems to be starting a more moderate phase.
The strong front this economy flashed during the world crisis was possible given its
cautions financial and fiscal policy, along with the necessary micro-economic
reforms. This situation led the country to go through the strongest growth in Latin
America in 2010, registering a 7.5% GDP. Despite the government’s efforts,
the growth rate in 2012 was barely 0.9% and the projection for this year and next is
at 2.5%.
Although all emerging economies have interrupted their growth, and today in
relative terms they are not as attractive as the used to be, the depletion of Brazil’s
economy is attributed to the high level of its currency, the stagnation of the prices of
commodity exports, the deterioration of transport infrastructure, social inequality, and
as a consequence of all of the above, the decline in investment levels.
Moody’s, Standard & Poor’s, and Fitch Ratings currently list Brazil at the second-tolast rating for investment, and according to these companies, this will not change;
in order to improve their rating, the Brazilian government will need a “long-term
approach”. Moody’s did turn the Brazilian outlook to “positive” in 2011, and towards
the end of last year, postponed its decision to possibly raise the rating one more year.
Despite the fact that President Dilma Rousseff, elected in October 2010, committed to
maintaining the policies of former President Lula, she has the great challenge of
continuing to achieve an economic growth acceleration plan for the country.
Above all, she must shift the great weight that the public sector has on the private
sector, in addition to carefully examining the tax system.
This plan establishes an ambitious program to support credit and investment
financing, and long-term budgeting measures, in addition to developing the
transportation, logistics and tourism infrastructures.
Also, it is necessary to take on measures that allow inflation to be kept between 2.5%
and 6.5%, as it has skyrocketed, and to considerably reduce the public debt. Today
it is above 60% of the GDP, an aspect that has rating companies worried.
Finally, one must note the social complications stemming during this phase. A
significant social movement has begun as a protest against some of the government’s
decisions, and because of the country’s economic results.
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2. Before this picture, the Brazilian government needs to show convincing signs that it is
focused on accelerating the economy, and in this way, is once again on the road to
becoming the “pretty lady”; not only because it will host world events, but also
because of its financial and social growth.
Elections will be here in a year, and President Dilma Rousseff will fight for another
term, despite the fact that there are currently few reasons to think that she will indeed
be reelected.
This article has been based on Florencia Bunge personal opinion.
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