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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