Rousseff Pressure Grows

Brazil’s economic woe shows no sign of improving, which is piling the pressure on scandal-hit president Dilma Rousseff. LatAm INVESTOR investigates how this will impact investors...

Despite winning election less than six months ago, president Rousseff now finds her popularity at just 13% - an all time low. Much higher is the 63% of the population that want to impeach her, according to a poll by local pollster Datafolha. Even more worrying for Rousseff is that disgruntled voters are now taking to the streets, with an estimated 1 million protestors attending a recent anti-Rousseff march.

Careful what you wish for... Rousseff's victory turned sour fast

One reason for her plummeting popularity is the ongoing Petrobras scandal. This incredibly complex bribery scheme involved contractors giving kickbacks to politicians and Petrobras executives in return for inflated contracts being awarded and approved. Voters have known about the scandal for more than a year but as each fresh detail emerges it gets closer to Rousseff, who was previously chairman of the Petrobras board.

So far there is no direct link to Rousseff but most corruption-weary Brazilians now assume that she must have known something.

"At some point Brazil will become a ‘buy’ again for international investors…"

The other factor in the protests is Brazil’s flat-lining economy. The country’s GDP is expected to contract by around 1% in 2015, which would be its worst recession in 25 years. This is compounded by strong inflation, which will see price rises of around 8% this year. Unfortunately for Rousseff there is not much she can do to counteract falling growth. With ratings agencies increasingly negative on Brazil’s sovereign debt she has been forced to implement tax hikes and spending cuts, which has fuelled public anger.

Most analysts still believe that Rousseff won’t be impeached. Yet her survival as a weakened president could well mean that Brazil shies away from the difficult decisions it needs to make to restore its economic competitiveness. At some point Brazil will become a ‘buy’ again for international investors yet, with the scandal and the economy continuing to throw up nasty surprises, it may not be for some time.