Date: 2016-05-17

Currently, Brazil is going through its worst economic crisis in twenty-five years. Many economic factors and government missteps have contributed to this crisis including:

Inflation: After years of economic growth, rising inflation rates first surfaced as a major issue in 2014. By December 2014 the inflation rate was at 6.41%. However, inflation continued to grow nearly month-over-month in 2015. By the end of the year, the inflation rate was sitting at 10.67%. Early projections by experts signalled an inflation rate of 7.56% in 2016, however, those predictions have already been readjusted to 7.61%. Expectations are that the inflation rate will fall to 6% in 2017.

Unemployment: According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil ended 2015 with an unemployment rate of 9%. In the final quarter of the year, the country had 9.1 million unemployed. Compared to the same quarter the year before, unemployment increased 41.5% or by 2.7 million people. 

GDP: Brazil`s Central Bank estimates that the country`s GDP decreased 4.08% in 2015. This is the first decrease in GDP since 2009 and the worst GDP decrease in the last twenty-five years. Financial experts predict a further decrease of 3.1% in 2016. Estimates for 2017 dropped slightly from 0.8% growth to 0.7% growth.

Consumer confidence and debt: According to the Getulio Vargas Foundation, consumer confidence fell 21.3% between December 2014 and December 2015. According to the National Confederation of Commerce, 61.6% of Brazilians hold debt. Despite years of growth, Brazil`s reputation of exorbitant interest rates did not dissipate. In January 2015, the average interest rate on credit cards was 334.6%. By December 2015, this rate rose to 431.4%.On other fronts, consumers’ wallets have been pinched by price increases in energy, gas and bus fare. More specifically, energy rose 51%, while bus fares increased 8.9%. Despite a decrease in oil prices around the world, Brazil has some of the most expensive gasoline and diesel prices. In Brazil, gasoline prices are 32% higher than the international average, while diesel is 45% higher.

Currency exchange rates: In 2014, the dollar increased in value over the Brazilian Real by 12.78% to USD$1 to R$2.66. The rise in the value of the dollar didn`t stop in 2015. In September, one US dollar was equivalent to more than four Brazilian reais, the first time in history. Overall, the dollar grew in value by 48.49% in 2015, the most in nearly 13 years. A high dollar influences the Brazilian economy by decreasing foreign direct investment, lowering the price of the country`s commodities and increasing the cost of imported products.

Foreign direct investment: A rising dollar, which has led to many multinational companies losing money in Brazil, and other economic struggles has weakened the country`s ability to attract foreign direct investment. FDI dropped 23% from 2014 to 2015. Despite this decline, the country was still eighth among countries attracting FDI having brought in US$56 billion in 2015.


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