Brazil’s exported goods have fallen in price but has increased local product prices due to recession. The strengthening currency puts the Brazilian economy to the test with higher prices paid for electricity and gasoline.
Analysts said the Dilma Government’s idea to remove the gas price ceiling and subsidisation of electricity led to this inevitable result, increasing inflation by 9 per cent and a high interest rate of 14.25 per cent.
A Sudden Jerking Reaction
Senior International Economist At PNC Financial Bill Adams said the sudden changes in input and output prices introduced a jerking, shocking movement to the Brazillian economy.
The reduction in the amount of output for Brazil introduced a negative supply shock, sending the local prices skyrocketing. Adams said the recession is “deep and sustained.”
Politicians and Natural Resources
According to analysts, external forces, such as Chinese investors demanding greater quantities of Brazilian ore or the value of the US dollar play huge roles for Brazil’s inflation and investor outlook. Investors would find plenty to invest in Brazil but only few to work with effectively given the outdated business outlook of the government.
This is the trouble caused by Brasilian Politicians, whose actions may contract by 3 per cent Brazil’s real GDP.