Home' Trinidad and Tobago Guardian : February 4th 2016 Contents BG18 REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt FEBRUARY 4 • 2016
January is a languid month in
Brazil. Beyond the hullabaloo at
samba schools---practicing for
their bawdy annual face-off dur-
ing Carnival, which will start on
February 5---business pauses while
Brazilians go on vacation in the scorching
southern summer. Fewer cars clog streets and
more bodies throng the beaches.
Politicians customarily switch off along with
everyone else. Congressmen return from their
Christmas break on February 2, but probably
will do little until after Mardi Gras a week
later. Neither they nor President Dilma Rousseff
will be able to relax, though. A frightening,
mosquito-borne disease has put the health
authorities on high alert. Meanwhile Brazil s
political and economic crises are deepening.
When politicians return to work, they may
regret the time they took off from attempting
to solve them.
The economic slide continues. The number
of jobs in the formal sector fell by 1.5 million
in 2015, the fastest pace of job destruction
since comparable records began in 1992.
Another one million could be lost this year,
analysts reckon. Sales of vehicles dropped by
a fifth last year. The International Monetary
Fund now predicts that GDP will shrink by
3.5 per cent in 2016, more than three times
as much as it expected in October. Despite
the recession, inflation has risen to nearly 11
per cent, its highest level since 2002.
Male breadwinners make up a higher pro-
portion of the newly unemployed than in pre-
vious downturns, which affected mainly female
and young workers, noted Naercio Menezes
of Insper, a university in São Paulo. That means
that the hardship caused by the current reces-
sion will be greater.
For the relatively young, joblessness is a
novelty. Many entered the formal labor market
during the commodity boom of 2003-2013.
No one knows how they will react to their
misfortune, warns former President Fernando
Henrique Cardoso, who also is a sociologist.
As misery grows, the government s capacity
to tackle its causes is diminishing. Prosecutors
investigating the vast bribery scandal centered
on Petrobras, the state-controlled oil-and-
gas giant, are expected to file additional charges
against senior figures in Rousseff s Workers
Party (PT), which has already been badly tar-
nished by the affair.
An even bigger worry for Rousseff is the
threat of impeachment against her on unrelated
allegations that she assented to the use of
accounting tricks to hide the true size of Brazil s
Her weakness makes her more dependent
on the goodwill of the PT and the trade unions
aligned with it, which are viscerally opposed
to the reforms needed to steady the economy.
This month Rousseff dared to acknowledge
that Brazilians retire too early---at 55 for men,
In effect, she admitted that the government
cannot stabilise its finances if it continues to
devote 40 per cent of non-interest spending
She backtracked, however, in the face of
resistance from her party and the unions. Rais-
ing the retirement age would be unacceptable,
the PT declared this week.
This will make it much harder for Nelson
Barbosa, the newly appointed finance minister,
to contain the budget deficit, which is close
to 10 per cent of GDP. His main idea is to
reintroduce a financial-transactions tax, which
is loathed by business but popular among
Rousseff s left-wing allies. However, this would
raise only US$2.5 billion in extra revenue, a
fraction of net government borrowing, expected
to be $122 billion this year.
Rousseff wants to summon back a council
of wise men and women, which she disbanded
during her first term, to suggest reforms. That
looks like a delaying tactic.
While fiscal policy wobbles, economists also
are starting to fret about monetary policy.
After weeks of hinting that it would raise inter-
est rates to fight inflation, the Central Bank
decided on January 20 to hold them steady at
14.25 per cent. The decision may have been
justified, since higher rates would weaken the
economy further and make it still harder to
control the fiscal deficit, but it looked like a
surrender to political pressure.
Central Bank president Alexandre Tombini
met Rousseff two days before the interest-
rate decision. Then he foreshadowed the bank s
U-turn by pointing to the IMF s gloomier pre-
dictions of Brazilian and global growth, which
by that point should have been no surprise.
Rather than shoring up Brazil s financial cred-
ibility, the Central Bank thus damaged it all
There is little prospect that congressmen
will take measures to repair it when they return
to work. Those who are pushing for Rousseff s
impeachment concede privately that they are
unlikely to muster the two-thirds majority in
the lower house needed to send the motion
to the Senate, but they plan to drag out the
proceeding as long as the vague legal deadlines
That will accomplish their goal of under-
mining the president. It will do nothing to
buck up Brazil.
@2016 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
Suriname has approached the International Monetary Fund
(IMF) and other lending agencies for assistance, as the country
continues to take a hit from the sharp fall in the price of com-
modities such as gold and oil, on which the economy depends.
The IMF said authorities from the Desi Bouterse administration
had discussed the possibility of financial support for their eco-
It said several policies have already been implemented in the
context of that programme with a view to strengthening the
level of international reserves and paving the way for the econ-
omy to achieve sustained growth and financial stability.
"Together with our sister organisations---the Caribbean Devel-
opment Bank, the Inter-American Development Bank, and the
World Bank---we stand ready to help Suriname meet the eco-
nomic challenges it is currently facing," the IMF mission chief
for Suriname, Daniel Leigh, said in a statement.
"At the request of the authorities, an IMF team will visit
Paramaribo in the next few weeks for discussions on Suriname s
reform program and financing needs."
Last November, Suriname devalued its currency by more
than 20 per cent, following a drop in oil and gold prices and
a major dip in financial reserves. The exchange rate moved
from 3.50 Suriname dollars to the US dollar, to 4.00 Suriname
dollars to the US dollar.
The devaluation was the second in four years.
In January 2011, the local currency was devalued by 16.4 per
cent and government announced tax raises on alcohol, tobacco,
gasoline and basic services as it sought to offset the impact
of payments of overdue public worker salaries.
Brazil: Partying on a precipice
Suriname approaches IMF for possible financial aid
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