Posted on 09/13/2015 6:25:47 AM PDT by dennisw
Dilma Rousseff has squandered Brazil's commodity boom, but the country is not in meltdown and is unlikely to set off an emerging market crash
Brazil’s currency plummeted to all-time lows and borrowing costs have tightened viciously after Standard & Poor’s slashed the country’s debt to junk status, warning that the budget deficit has reached danger levels.
The downgrade is a painful blow to a nation that thought it had finally escaped the Latin American curse of boom-bust cycles and joined the top league of rich economies.
It is the second of the big emerging market economies to be stripped of its investment grade rating this year after Russia crashed out of the club in January. Little remains of the BRICS allure that captivated the world seven years ago, and now looks like a marketing gimmick.
The Brazilian real tumbled to 3.90 against the US dollar as markets braced for parallel moves by Fitch or Moody’s. The currency has lost 31pc of its value this year and more than 60pc since early 2011, when slums in the favelas of Rio were selling for the price of four-bedroom houses in the US.
“The numbers are going to get much worse before they get better. We see nothing on the horizon that could be perceived as ‘good’ news,” said Win Thin from Brown Brothers Harriman.
Expects the real to reach 4.50 over the next three to six months in a cathartic overshoot, with the Bovespa index of equities likely to fall by another two-fifths, testing its post-Lehman low of 29,435 as the excesses of the credit bubble come home to roost.
Investors have begun to shed holdings of Brazilian debt, afraid that some funds may be forced to eject Brazil from their indexes and liquidate holdings if a second agency joins S&P.
(Excerpt) Read more at telegraph.co.uk ...
If I was in a position to, I would be on the sidelines waiting for their bonds to crash. Then buy everything in sight for pennies on the dollar. Or real, as the case may be.
I hear the Olympic guys rowing boats are getting sick, physically sick, because of the unbelievable pollution in the water. Rousseff’s really done a bang up job down there; is she trying to be another 0bama?
The up coming Olympics ought to be really fun especially if they take in a bunch of Syrian refugees.
First, we hear this before every summer Olympics....Greece, China....Brazil. I will not let the press lead me around. I was just there and the beaches and water are fantastic. Is there pollution? Of course....these are urban areas.
Second, Dilma Rousseff is a communist.....do you think she knows how to run a capitalist economy? Brazil is mired in corruption, kickbacks and crime. The good news is that the younger generations are rejecting this and looking to have real ethics for business and government.
The laws are dead set against you when buying property in Brazil. A tenant can basically claim ownership after a certain period of a rental property. Americans in particular, unless on site, would find property management a challenge during good times. If you have family in Brazil it’s a different story but again, you have be to be very careful about who you rent to and for how long. Don’t go for “its the same as it is here” stuff. This is based in nightmares I’ve heard from Brasilians. Research carefully...cheers!
One of the things I remember from my visiting days was that in Rio, the favelas basically let raw, untreated sewage flow right down into the waters by Ipanema. The locals would still go swimming but it was well known that this was the norm.
Brazil is renowned for squandering its feasts resulting in famine.
For example, it has very large oil reserves, and at times has had enormous wealth. After its first boom, they decided to spend all that money on a new capital city, on a great mesa without any resources, in the middle of a desert. They hired some of the most expensive avant garde architects in the world to produce a place that is unlivable. With all of their effort in aesthetics and none in utilitarianism or ergonomics.
Meanwhile, the rest of the country was destitute and starving. At the same time, a filmmaker did a starkly realistic, cruel and unforgettable movie about a family slowly starving in the perpetual drought of the countries northeast, called “Vidas Secas” (Barren Lives) (1963).
http://www.imdb.com/title/tt0057654/reference
This is not a pleasant or uplifting movie.
Fortunately, this time, with the enormous surge in oil prices in the early Obama years, Brazil again had a huge amount of money. So this time they decided not to squander it or achieve anything useful with it at all, and elected a socialist president to waste it as fast as possible.
Some friends (married couple) went to Brazil a few years ago. They took a walk along the beach and started noticing little bits of toilet paper everywhere. Needless to say, they were pretty grossed out.
And that is why the commodity boom didn’t help them. When something “belongs” to everyone (usually called the people, but they mean the government), it fails.
Hey, they need to bring Bernie Sanders down there and show them how socialism can work! He promises it will.
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