Navigating the Storm

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Optimism is in short supply here in Brazil and for good reason. Consumer confidence is at its lowest level in 10 years; both inflation and unemployment are increasing, and debt as a percentage of household income is approaching 50% — perhaps not surprising when the annual interest rates on most credit cards are in excess of 250%.  The political establishment has been rocked by a series of seemingly pervasive corruption scandals, public finances are in disarray, and the government has no money to spend its way out of the crisis. Social assistance payments to the poorest people, and generous workers benefits, keep a lid on widespread discontent, but the government suffers from the lowest popularity rating in history, and many are calling for the impeachment of the president. Little wonder then in a recent editorial, the Financial Times described Brazil as a terminally-ill patient.

Nevertheless, commerce continues. The daily flow of traffic clogging the inadequate transportation networks in most major cities seems as bad as ever. While many industries are suffering because of the commodity-related downturn and the paralyzing effects of the Petrolão, Brazil’s economy remains the most important in South America. Construction crews are working 24 hours a day on the overdue infrastructure projects to be completed before the Olympic Games in Rio de Janeiro next summer, and there is no immediate prospect of capital or intellectual flight.

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