Brazilian Industrial Sector at Lowest Point Since 2009

October 5, 2016

The Brazilian Congress returns to work this week after a recess and faces news that the industrial sector has fallen yet again. Congress has been pushing the Senate to vote on tax raises on Brazilian companies in order to avoid a national credit downgrade.1 Since the industrial sector has fallen in many sectors, including automobile and informatics technology manufacturing, this push from congress is necessary in order for the country to evade a full blown economic recession.2

In May of 2015 the industrial sector fell .6% and continued to fall another .3% in June, gauging the total loss of industrial production at 3.2% since 2014.1 Many economists are worried, rates like this haven’t been seen since the economic crisis of Brazil in 2009. This fall in production marks the eighth consecutive quarter of losses and doesn’t bode well for either unemployment or the real, Brazil’s rapidly falling currency. The real currently stands at 3.44 per US dollar, a sharp change from early 2015 rates of 2.7. This 23% drop in value marks the worse decline in currency among the 24 “emerging market currencies.” Along with plunging currency values, many industries are facing employment layoffs, such as the shipyard industry which was forced to cut 17.5% of the workforce this past year.1 Many other industrial employers are taking a hit as well, marking a 5.8% increase of unemployment in the industrial sector as a whole.2

Economists fear that huge events such as 2014’s World Cup and the upcoming 2016 Summer Olympics in Rio will not help the slumping economy. These huge events actually halt production and force breaks which contribute to the downward spiral occurring within the industrial sector. Along with this, Brazil’s current credit rating is as low as it can possibly be and recently, 30 national infrastructure corporations were given a negative credit rating.1 Business confidence is, naturally, also extremely low, the only market currently doing well is the export market which hinges on the fact that the real is losing value. In order to see a turnaround, the senate will have to pass a bill to tax companies or Brazil’s economy could be damaged even more, reducing it to levels seen during the world economic collapse in 2008 and 2009.

As a result, protesters have recently taken to the street to demand the impeachment of president Dilma Rousseff. In São Paulo, Brasilia, and Rio de Janeiro, the protestors, most of whom are white and middle class, are demanding President Dilma’s impeachment.3 Earlier this year, a similar batch of protests occurred, spurred by the huge Lava Jato (Petrobras) Scandal. Between the nationwide corruption and the steep economic downturn, many Brazilians are fed up with this seemingly endless cycle of economic instability. Even with Dilma’s approving ratings close to 10%, little can be done to impeach a democratically elected president who has been cleared of any activity in the Petrobras scheme, but the economic downturn could negatively affect both the wealthy and working class Dilma supporting, demographics.

1. Billers, David. "Brazil Industrial Output Falls Less Than Economists Forecast." Bloomberg, 4 Aug. 2015. Web. 04 Aug. 2015.

2. Correa, Marcello. "Indústria Volta a Encolher Em Junho E, No Ano, Tem O Pior Resultado Desde 2009." O Globo. N.p., 04 Aug. 2015. Web. 04 Aug. 2015.

3. Davies, Wyre. "Brazilian Protesters Call for President Dilma Rousseff's Impeachment - BBC News." BBC News. BBC News, 17 Aug. 2015. Web. 18 Aug. 2015.

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Sophia Winston
Sophia Winston is a Spanish and Urban Studies major at the University of Pittsburgh, she is also pursuing a certificate in Latin American Studies and a minor in Portuguese. She has spent a semester abroad in Rio de Janeiro, Brazil and is currently a senior.