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Is the economy in Brazil weakening?

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Bloomberg published an article the other day on BRICs countries (Brazil, Russia, India, China).

The largest emerging markets, whose economies grew more than four-fold in the past decade, are making losers out of everyone from central bankers to Procter & Gamble Co. (PG) as their currencies post the biggest declines since at least 1998.

A declining economy is something we hear a lot of on the news, with the US’s economy problems, and more and more countries in the EU facing economic difficulty, it was only a matter of time.  However Brazil has often be touted as an economy on the rise, the Olympics and the World Cup are coming.  Real Estate and businesses are growing, with lots of foreign investments, and the middle class growing.  Brazil was doing great.  When we moved here a year and a half ago, I read many an article on how expats were being brought to Brazil to help with all of this growth.

But it turns out Brazil is at the edge of it’s growth bubble. Yes, this is just an article, maybe Brazil is still growing strong.  But the article points out that investors are pulling out, and Brazil’s consumer default rate rose to the highest level since 2009.

A surge in bad loans in Brazil will weaken the real further, said Amit Rajpal, who manages global financial funds for London-based Marshall Wace LLP. The default rate on consumer debt rose to 7.6 percent in April, matching the highest level since December 2009, as lending growth slowed to 18 percent from a record 34 percent in September 2008, according to the central bank.

Coupled with the default rate, is the currency issue.  While US expats are cheering, with their dollar going further, this is actually causing issues across the board, as a weak Real is not good for businesses here.

Currencies from Brazil, Russia and India will probably decline at least 15 percent further by year-end, said Jen, the former head of global currency research at Morgan Stanley.

Not so scientific is an observation that it seems like a lot of expat “contracts” seem to be up, or are just leaving Brazil right.  When we arrived a year ago, we would have killed for people leaving so we could scoop up all of their belongings, but there weren’t as many as there seem to be now— but then again maybe we are just more in the loop!

About scrubgrub

I'm just another soul on the internet, posting random thoughts into the ether, because well I love stumbling on other peoples random thoughts, so I figured why not add mine to the mix too. I'm also the mom to two very funny little boys, and how can you not share that with everyone?

One response »

  1. Funny I was reading the same thing on forbes a couple days ago. But really the economy has only been good to those in good positions in Brazil and with businesses that were managed well opened at the right place and right time sort of thing. I haven’t seen really any opportunities academically or professionally in my area. So you really need to live in rio or sao paulo to included in this economy.

    I noticed a lot of people losing their jobs due the crisis and low value of the dollar, last year. Expats are moving out like crazy here, too. But I didn’t pay attention to expats last year, so I don’t know what was the norm. I have talked to a few and said they go where the money goes.

    Reply

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