Published On: Fri, Sep 25th, 2015

Brazil’s Recession Could Be Worse Than Previously Expected

Dilma Rousseff

Dilma Rousseff, Brazil’s president has been struggling to maintain power over the country after a vast corruption scandal.

New lows have been reached for Brazil’s currency, the real, it was revealed on Thursday and the country is preparing for a major crisis as unemployment has increased and the central bank predicts a more serious recession than previously thought.

The real has fallen 33 percent against the dollar which makes it the worst performing major global currency of the year so far. However, the president of Brazil’s central bank, Alexandre Tombini has made an announcement indicating that Brazil may use its reserves to boost the currency which prompted a slight rebound to 4.04 per dollar.

Brazil’s currency was created in 1994 and has been the backbone of the country’s rise to economic stability and power. An economist, Edmar Bacha, who was involved in the implementation of the real in the 1990s said ““I am disillusioned and upset with what’s happening, all the work that we all did to create the real, to create stability, was destroyed by the government”.

The sharp decline in the currency has been initiated by a decrease in the prices of commodities, the increased value of the U.S dollar and last month’s devaluation of the Chinese markets. However Brazil’s political turmoil is also contributing to the economic crisis as President Dilma Rousseff struggles to maintain power as leader.

Rousseff is currently under pressure to support the government’s fiscal accounts in order to avoid another downgrade by credit agencies, following the one by Standard & Poor’s this month.

Due to a growing impeachment movement in congress, the president is offering increased power in her cabinet to politicians of her main coalition ally, the PMDB in return for not supporting opposition moves to oust her.

The move has been seen by many as a desperate attempt to retain office following a vast corruption scandal at state-owned oil company Petróleo Brasileiro SA, or Petrobras and many protestors taking to the streets calling for her impeachment. Due to Rousseff’s political weakness her ability to push forward measures to turn Brazil around have been limited. Last year she named conservative economist Joaquim Levy as finance minister in a bid to improve Brazil’s finances however most of his changes have been diluted or blocked in Congress.

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