Foreign Capital Returns to Brazil. Will Growth Follow?

Dressed in the national colors of green and yellow, a flood of Brazilian protesters washed over the streets of the country’s cities this spring, calling for President Dilma Rousseff’s impeachment. Brazilians have grown tired of their head of state, who squeezed into a second term with 51.6 percent of votes last October. Fernanda de Lima, CEO of São Paulo–based Gradual Investimentos, reckons that Rousseff would have lost had the polling been held three months later.

人们有充分的理由抱怨。自罗塞夫2011年上任以来，这个南美最大经济体的经济增长一直疲软，从2010年的7.5%下滑至2014年的0.1%，今年陷入衰退。全球大宗商品超级周期的结束和石油市场的崩溃在很大程度上解释了经济下滑的原因，但国内政策问题——包括不断增长的赤字和不断加速的通胀——也难辞其咎。通胀率已升至8.9%，几乎是央行目标利率的两倍。与此同时，国有石油巨头巴西石油公司（Petróleo Brasileiro）日益严重的腐败丑闻，也抑制了经济，削弱了人们对罗塞夫的信心，罗塞夫曾在2003年至2010年担任该公司董事长。

International credit rating agencies have been threatening to strip the country’s investment-grade status, which would stifle investment and jack up borrowing costs. In April, Fitch Ratings changed its outlook forBrazilto negative; it rates the country’s debt at BBB, two notches above junk status. In March, Standard & Poor’s had lowered its long-term debt rating on Brazil to BBB–, its lowest investment-grade rating.

Rousseff’s constituents blame her for many of these shortfalls. The president ended 2011 with a 72 percent approval rating. Nine months after the 2014 election, Rousseff’s popularity has crumbled to 10 percent, the lowest presidential approval level since 1992, just before then-president Fernando Collor de Mello was impeached for corruption. Yet GI’s de Lima sees a silver lining in the slide: “Essentially, this has forced her to share her power and make changes.”

Rousseff has loosened her grip on politics and economics. She made Joaquim Levy her new Finance minister in January and has given him more or less free rein in necessary economic policy decisions, says Alex Wolf, Edinburgh, Scotland–based emerging-markets economist at Standard Life Investments. “This was somewhat of a positive surprise,” he adds. Pro-austerity budget hawk Levy promises to turn last year’s deficit of 0.4 percent of GDP into a primary surplus of 1.1 percent of GDP by year-end through tax hikes and spending cuts. Brazil’s congress has postponed a vote on the measures, however, and an ever-slowing economy has diminished tax returns so far, sending the real into a tailspin. The currency plunged by nearly 30 percent against the dollar in the 12 months ended July 13. Senator Romero Jucá of the Brazilian Democratic Movement Party has proposed reducing the primary surplus target to a modest 0.4 percent of GDP this year.

“利维知道需要做什么以及如何去做，”德利马坚持说，他指出，这位“追求结果”的部长成功地离开了巴西第二大私人银行下属布拉德斯科资产管理公司（Bradesco Asset Management）总裁的职位，以改造巴西经济。她说，4月份，外国投资者在巴西股市BM&F Bovespa成为净买家，预示着信心的回归。

The near-term outlook remains challenging, though. De Lima expects the Banco Central do Brasil, which has raised its benchmark rate by 2 percentage points since December, to hike it another 75 basis points, to 14.5 percent, by December to bring inflation under control. The International Monetary Fund forecasts the economy will contract by 1.5 percent this year and grow by just 0.7 percent in 2016.

More needs to be done to diversify exports beyond commodities, argues Standard Life’s Wolf. Brazil also needs to boost productivity, he adds, but two areas that could provide a lift — education and investment — are being cut by the government to fix the twin fiscal and current-account deficits.