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Brazil In Trouble
Dilma’s Last Stand?

Brazil’s stock index completed a seven-day slump yesterday, buffeted by China’s own stock market crisis, as well as by the prolonged slump in oil prices. The state-owned scandal-plagued oil giant Petrobras has been leading the charge into the abyss, according to Bloomberg:

Petrobras, the oil producer at the center of Brazil’s largest corruption scandal, extended a seven-day plunge to 18 percent. The company has said that its investments in offshore production are economically viable with the commodity above $45. Crude fell more than 20 percent from its June high to $47.54 a barrel as a rebound in U.S. drilling signaled that producers may keep adding supplies to a global glut.

“The scenario for Petrobras is getting even more complicated,” Celson Placido, an economist at brokerage XP Investimentos, said by phone from Sao Paulo. “The plunge in crude implies lower profits from its investments, and may also be negative for the company’s asset negotiations.”

 Chief Executive Officer Aldemir Bendine is seeking to contain damage from a decade of alleged kickbacks with plans to sell $15.1 billion in assets by the end of next year. The world’s most-indebted oil company is joining producers from Chevron Corp. to ENI SpA in trying to raise cash and cut operating costs amid a rout in oil.

With unemployment and inflation rising, Brazil is facing what many analysts are predicting to be the worst recession in over 25 years. It’s no shock, then, that Brazilian President Dilma Rouseff, whose close associates have been snagged in the ever-expanding investigation into corruption surrounding Petrobras, has approval ratings that are at eye-watering lows:

Brazilian President Dilma Rousseff’s approval ratings fell into the single digits in July, according to a new survey released Tuesday. The dismal new numbers came out a day after Brazil convicted top construction executives for the first time in the widening probe of state-run energy firm Petrobras.

According to Tuesday’s survey, conducted from July 12 to 16 by Brazilian polling firm MDA and commissioned by the National Transportation Confederation, just 7.7 percent of respondents rated Rousseff’s performance as “great” or “good,” while 70.9 percent rated her “bad” or “terrible.” Of the remaining respondents, 20.5 percent rated her as “just okay.”

Perhaps most ominously for Rouseff, the speaker of Brazil’s lower house, Eduardo Cunha, defected from his party two weeks ago (which is still in the ruling coalition) and proceeded to immediately make noises about impeachment.

While Rouseff’s coalition partners are saying they want the government to hold together through the next elections in 2018, nationwide protests are scheduled for August 16. Those will be the ones to watch. Should they match or exceed the scale of the already massive street protests that convulsed the country’s major cities this March and April, some of the coalition partners’ calculus could quickly start to change.

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  • JR

    Although I have no love for socialists of any kind, being the 2nd socialists leader of a huge commodity exporter like Brazil has got to suck. Poor Dilma. Unlike her predecessors, she is not charismatic, she is dealing with the other side of commodity boom, and all the excesses of Lula’s reign are coming due.

    • f1b0nacc1

      Everything you have said is correct…. BUT…..
      I would have some (not much) sympathy for Dilma if when faced by all of the issues that she is dealing with, responded with something other than the boilerplate populist socialism that has become de rigeur in Latin America. You are correct that Lula start most of this rolling downhill, but Dilma has done absolutely nothing to reverse it, and has in fact continued all of the bad practices.

      • JR

        Well, yeah. But you can’t expect somebody who’s been training to be a gymnast all of a sudden to start competing in power lifting. She is who she is, which is a doctrinate socialist.

        • f1b0nacc1

          Once again, we agree. With that said though, my point was that I have no sympathy for her BECAUSE she has continued to double-down on the failed policies of her predecessor. To use your example, I would have sympathy for a gymnast who was compelled against her will and better judgment to participate in a power-lifting competition. I would NOT sympathize with a gymnast who voluntarily entered such a competition and expected to win.
          Make no mistake about Dilma, she isn’t trapped in this mess, she is a willing, even eager participant in it.

          • JR

            All I know, I went to Brazil once, and loved it. Rio is amazing, although it is noticeably more dangerous there than it is anywhere in the US. If all of this leads to dollar gaining 40% on the BRL and making vacations there cheaper, then sign me up. Re-electing Dilma was a mistake, but we elected Obama twice so I can’t go out there throwing stones.

          • f1b0nacc1

            I loved Rio too, but that has more to do with the women than the government (grin)….
            Dilma is destroying their economy, and has no managerial skills whatsoever, but at that she is probably more capable than Obama…though in fairness that is setting the bar pretty low.

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