"Brazil After the Elections" - Franco Parisi, Bailey Iverson and John White
By: Trevor Bell
Visiting International Scholar Franco Parisi, along with Bailey Iverson and John White, discussed the economic and societal changes to Brazil after the re-election of President Dilma Rousseff. Throughout the semester, Parisi has worked with students in the Rawls Business Leadership Program and his Finance course to discuss current international issues.
Bailey Iverson is a senior Marketing major with a focus in sales. She is on track to graduate with honors in May 2015. She actively involved in many student organizations, including President's Select, Chancellor's Ambassadors, the Rawls Business Leadership Program, and her sorority, Delta Gamma. Bailey was also recognized as the 2014-15 Texas Tech Homecoming Queen among her various other collegiate awards.
John White is a junior Agricultural Economics major. John is also a member of the Texas Tech Red Raiders football team, where he plays defensive back and on special teams.
Brazil After the Elections
On Sunday October 26, Dilma Rousseff was re-elected in the Brazilian Presidential Elections. Although this is good news for the Rousseff campaign, this may mean bad news for Brazil's economy. The future of Ms. Rousseff's presidential seat does not look promising because of her lack of concern for the Worker's Party during her election campaigns. Immediately after the elections, the country saw its benchmark equity index (Ibovespa, IBOB) drop by more than 3.4%, and the local currency posted the world's biggest loss as it sank 2.3% to a nine-year low.
This news is crucial while understanding the importance of Brazil as a global player. Brazil, a resource-rich country with a population greater than 200 million, held a GDP of $2.53 trillion in 2012 and a Per Capita GDP up to $14,555 on the 2013 U.S. dollar. However, after the elections there is no sign of a relevant change to improve the economy's social turmoil and inflation problems. Brazil is also facing a currency weakening as the Central Bank sold more than $197.2 million of foreign-exchange swaps as part of the intervention program and renegotiated more than $393.4 million on old contracts. Therefore, all expectations are leading to a technical recession after two consecutive negative quarterly GDP reports.
Rousseff is not new to criticism within her presidential reign. During the recent World Cup last summer, the President faced several protests, which are expected to occur more frequently. With the poor performance of the economy, the government deficit will grow, resulting in a negative impact in the credit spread and its investment grade; meaning that Brazilian business and consumption will face a growing interest rate.
With the rest of the world - with the exception of the United States - struggling economically, and Rousseff looking to Asia and Russia to be partners, capital will prove to be very elusive for Brazil. These economic problems will prove to be a difficult task for the returning administration. "The high school students in Brazil have noticed the strains the government has placed economically on the Brazilian people. The ever-growing pressure for a strong administration that will take the people of Brazil into account is crucial. The government, to these young students, is more concerned with hosting large sporting events like the Olympics and World Cup and forgetting to spend that extra money on the people who really need it the most. The government during the summer months was a difficult, heated conversation with the Brazilians," said Bailey Iverson, a senior marketing major, who recently visited with the TTUISD Brazilian students this past May leading up to the World Cup.
However, on the bright side, commodities prices will rebound in a few years and there is an expected wave of tourism flow into the country. Also, the rapid fall in the President's popularity allows Rousseff to look for changes in how she runs her administration.
Rousseff won the recent election, but now she has to win the vote of business investors. This next term will be much harder than the previous, because of past corruption scandals, Dilma's ghost, and changes in industrial regulation especially environmental law. Fortunately, Brazil has the people, rich natural resources, and the charm to surprise not only the world but the world markets as well. Good luck to President Rousseff and to the country of Brazil.This supports the efforts outlined in the Rawls College of Business Strategic Plan. Learn more about the LEADER 2020 Strategic Plan and follow our progress on Twitter at #RawlsLeads.
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