Brazil’s economy stutters

Brazil is now generally seen as an economic success story. The most influential country in South America and one of the world’s biggest democracies, it is a rising power on the global stage. Over the past few years, it has made considerable progress in its efforts to raise millions of its citizens out of poverty and the discovery of major oil reserves off its shores could enhance its prospects yet further. The country was also selected to host this year’s football World Cup.

However, things are far from perfect in Brazil and there have been many public demonstrations ahead of the tournament. Recently, there was a wave of strikes by police officers, bus drivers and a range of other public employees, causing massive disruption in major cities including Rio de Janeiro and Sao Paulo. Meanwhile, new research suggests the nation’s economic growth is slowing.

Official statistics

Figures produced by the Brazilian Institute of Geography and Statistics have revealed that the country’s economy grew by just 0.2 per cent during the first three months of this year. This compared with growth of 1.9 per cent during the same period last year. The organisation also revised down economic growth during the final quarter of 2013 to 0.4 per cent.

President Dilma Rousseff suggested that the football event will promote growth. However, it is thought that high inflation and low levels of business investment dampened the anticipated lift from government investment in initiatives leading up to the competition.

Business investment in the country tumbled by 2.1 per cent between January and March 2014. This was the most sizable decline recorded in the last two years. Meanwhile, inflation remains at six per cent, which is above the central bank’s target.

Already a loss for Brazil

Commenting on the figures, Alfredo Coutino, director for Latin America at Moody’s Analytics, said: “This year is already a loss for Brazil. There haven’t been any structural changes. The government seems to be more interested in elections and the private sector is still waiting to see what will happen,” the Wall Street Journal reports.

The publication also quoted James Lockhart Smith, a Latin America analyst at the risk consultancy firm Maplecroft, who believes the upcoming football tournament will bring a fresh wave of protests and will cause further economic problems for Brazil.

He remarked: “Work just isn’t going to get done in the next few months. There are a lot of disruptions.”

Weakness abroad

During a recent news conference, Brazilian finance minister Guido Mantega attributed some of the economic problems facing the country to weak conditions abroad, particularly in the US. About this, the politician stated: “The world’s biggest economy, the US, contracted. That hurts us because it means the US imported less.”

However, on a more positive note Mr Mantega predicted better results during the second quarter of this year. He commented: “We have inflation falling, which returns purchasing power to consumers, and the volatility in international capital markets is diminishing.”

The eyes of the world will be on Brazil over coming days and weeks as the country is thrown into the full glare of international media scrutiny.

Author bio: Anna Longdin writes regularly about UK and global economics. She visits sites includingSimply Academy to ensure she’s always up to date on all the latest news and developments.