A constant refrain I would often here in South America was this, “North Americans think every pot has a lid, that every problem has a solution. Here in this place, we know that answers sometimes are few.” I was told this usually when I was trying to resolve what I considered a simple but easy issue. It would come up a lot when I went to the market. I was accustomed to the variety and abundance of American grocery shopping. So, you can imagine my surprise when the grocer would say they had no more eggs in stock. Wait, what do you mean you have no… more…?
Reading the news from the continent now, it is obviously the decline of Brazil that stands out. The Olympics in Rio de Janeiro were intended to be a celebration of a city and country that is possibly one of the most awe-inspiring on our planet. However, the political and economic dysfunction plaguing the country has brought dark clouds over this celebration. This once booming economy is now mired in scandal, impeachment and budget cuts.
The giant fall of Petrobras, the government controlled oil company, has destabilized the economy by hurtling thousands of Brazilians into unemployment. Fraud and bribery and corruption have indicted 117 officials—many who are high-standing in President Dilma Rousseff’s own party. The fall of Petrobras was so critical because Brazil was dependent on oil and now the country’s most important company has lost half of its value.
So, what does 2016 hold for the once promising “B” in the BRICS nations? The country is fighting corruption and its leader, Ms. Rousseff, is fighting to stay in office. A huge swathe of the country’s budget is protected by federal law making reform a political quagmire. And to add insult to all the internal strife, just before the end of the year, Fitch downgraded the country’s debt to junk status. The answer to what the future holds is unknown, but the skies are looking dismal. The corruption in Brazil is far more epic than any Olympic celebration could ever be and the impeachment process is just starting to heat up. I guess the South Americans were right: sometimes there just are no good answers.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer