Brazil: Congress closer to impeachment while economy continues to contract - Wells Fargo

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Analysts from Wells Fargo, explain that while the Brazilian congress moves closer to impeach Dilma Rousseff, the economy continues to contract with no end in sight.

    Key Quotes:

    “While all of this is happening (Impeachment process), the Brazilian economy continues to contract with no end in sight for now, although we have seen very small signs that the economic crisis may be abating or at least not deteriorating anymore.”

    “In light of all this, we are not saying that things look good for the Brazilian economy this year. We project the economy will contract 3.5 percent in 2016 after plunging 3.9 percent last year, while we are still expecting very low GDP growth in 2017 of 1.4 percent.”

    “Today’s crisis is very different than past crises and the potential outcomes are not clear at all. The political system is in crisis and some of the most important political actors are either criminally implicated in it and/or there are other power brokers that could wreak havoc on any potential solution.”

    “From an economic point of view, any improvement in global growth is good news for the Brazilian economy. Other good news would be further slowing in inflation, which would help stabilize economic activity and improve the conditions of those that have fallen back into poverty.”

    “However, for a solution to be sustainable, the country needs to devise a political solution to the current impasse. The courts are working relatively efficiently and the country will likely have solutions to the current criminal investigations. However, the country runs the risk of “recent opposition” politicians trying to overturn the current government as a means of affecting recent court rulings against them. Hopefully, the system is capable of surviving this very difficult environment.”
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