2014 Brazilian economic crisis

From the late 1990s till 2012, prices for these export commodities rose significantly (partly because of increasing demand from China), resulting in about two decades of economic growth.

[8] During Luiz Inácio Lula da Silva's left-wing presidency from 2003 to 2010, the government redistributed wealth through welfare programs and raised the minimum wage in order to increase consumption.

[9] In response to critics of Lula's socialist economic stance, his successor, Dilma Rousseff (president during the crisis), introduced macroeconomic tax exemptions and subsidies.

In the presidential election of the same year, President Dilma Rousseff was re-elected to a second term, defeating the PSDB candidate Aécio Neves by a narrow margin.

[12][13] According to Gustavo Franco, President of the Central Bank during the FHC government, the main cause of the crisis was internal and related to "local macroeconomic measures that went wrong.

The ensuing fiscal sustainability crisis raised country risk, long-term interest rates, and uncertainty, substantially reducing consumption and investment in 2015 and 2016.

The reestablishment of prices and the necessary monetary policy to bring inflation back to target also contributed to the recession, mainly due to the loss of credibility of the Central Bank.

[...]Previously, the state had played a crucial role in expanding the domestic market through consumer incentives, such as raising the minimum wage, income transfers, and credit expansion.

[20] In an attempt to reverse the deterioration in public accounts due to falling revenue, a fiscal adjustment was implemented in 2014, which included highly recessive policies (i.e., aimed at reducing expenses and increasing taxes).

[23][24] The fiscal adjustment was not successful even in its main objective, which was to achieve a surplus in public accounts, as the recession in which the country found itself reduced government revenues.

According to Roberto Dumas, a professor at Insper, the government made a strategic mistake during the commodity supercycle by stimulating consumption instead of prioritizing industrialization and improving productive capacity.

[27] According to Steven Tobin from the International Labour Organization (ILO) Research Department, the decrease in external demand, especially from China, combined with the fall in commodity prices in the second half of 2014, were factors that contributed to the crisis.

[28] Between June and December 2014, the commodity price index published by the International Monetary Fund (IMF) experienced a cumulative decline of 29.3%, which continued to increase until it was interrupted in January 2016.

[31] The publication also argued that then-president Dilma Rousseff could have made better use of the commodity boom of the 2000s to reduce the bloated state, which consumed 36% of GDP in taxes.

Silvia Matos shows [...] through a comparative analysis that, although other economies have also experienced a growth reduction in recent years, the Brazilian deceleration was more intense.

Based on this, Silvia Matos concludes that factors specific to our economy are the most relevant in explaining the worsening performance of the Brazilian economyIn the international context of major protests following the 2008 financial crisis, such as the Arab Spring in the Arab world, Occupy Wall Street in the United States, and Los Indignados in Spain,[32] Brazil experienced major protests in 2013, the largest since the demonstrations for the impeachment of Fernando Collor in 1992.

In response, the federal government announced measures to try to address the protesters' demands[35] and the National Congress of Brazil passed a series of concessions, known as the "positive agenda.

"[36] The following year, in 2014, the Operation Car Wash investigation began, revealing a vast corruption scheme involving the political class and parties.

[37] The election was also marked by turmoil and controversies, mainly due to Operation Car Wash.[38] In this context of political crisis, the Congress began to vote on measures that could generate more expenses for the government.

The proposed spending increases voted by Congress occurred at the same time the government intended to make cuts to achieve the fiscal target for the year.

In a scenario of an economy in crisis, this hindered the rebalancing of public accounts by increasing state expenses and making the economic adjustments proposed by Dilma unviable.

The total amount of funds released in 2017 for parliamentary amendments (a legal mechanism used for political negotiations) increased from 959 million to 1.5 billion reais just in June, the month following the JBS scandal.

The study also pointed out that the sector was a limiting factor to the recovery trajectory of industrial GDP and economic activity in aggregate terms.

[63] Finance Minister, Guido Mantega, lessened the economic result and, in comparison to Europe, declared that: [In Brazil] we're talking about two trimesters [of negative GDP growth], and we know that the economy is in motion.

Many underqualified people gave up trying to get a job, and the loss of hope was at a "[...] record high, and it helps to explain why, even after the decrease in unemployment, inequality kept rising.

They are high executives, who are abandoning their careers to open a business abroad, people with Ph.D., which is sad because the country is losing resources.An OECD report shows an even higher number [citation needed] .

Similarly, data from Receita Federal shows that the number of people leaving Brazil increased in consecutive years since the beginning of the crisis.

][citation needed] Since the impeachment of Dilma Rousseff and Michel Temer's subsequent rise to power, several measures, most of which are unpopular, were implemented or proposed to get the economy back on track.

"[88] However, economists say that the growth characterizes only the end of the "technical recession" and that it is still too early to claim that the crisis is over, given that unemployment remains high and there's still widespread uncertainty regarding the future of the economy, especially in the aftermath of the recent political scandals.

[7] In turn, Brazil's GDP after the 2014 crisis was expected to reach the pre-crisis level in 2022, according to an optimistic estimate, with 20 quarters of recovery in total.