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Mavi News

01-03-2019

Forbes magazine analysing Brazil´s economic weakness.

“We need to see something happening on this issue by the first half of the year, at least something in the legislature by then,” says Jan Dehn, head of research for the Ashmore Group, a $76 billion emerging-market asset manager based in London. Ashmore is overweight Brazilian fixed income and the local currency, the real.One of the reasons for the new weakness is Brazil’s fundamentals.

The amount of money Brazil is dishing out each year to pay public sector employees, from politicians to public school teachers, military brass to police officers, is equal to 3% of the country’s GDP. Unless Brazil’s economy is growing at 3%, which it hasn’t done in at least eight years, then the Brazilian government has to take out loans to pay its retirees. It would be easier if Brazil’s real was a global currency, but alas, the real is not the same as the U.S. dollar.

“If they don’t get this done under Bolsonaro early, then I think we have a serious problem. It’s like they have a gaping wound and are bleeding out,” says Dehn, who is usually moderately bullish Brazil.

For complete version, please click here.

Brazil´s new president has absolutely no experience with economic issues. A former army captain and longtime third rank politician he depends on a mostly unknown staff.

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