FX.co ★ World Cup not to cure Brazil’s economic ills

International experts had been sure that such a major event as the 2014 FIFA World Cup would provide momentum for Brazil’s economy. But now they claim that the event is unlikely to have a positive impact on the country’s growth. Emerging markets analysts stick to bearish forecasts for Brazil. The bottom line is that fiscal reforms of the new government are to cause some negative consequences.
“It’s not about (if Brazil wins the World Cup), it’s about what it exposes: a government that’s unable to deliver what they say the people need for education, for transportation, infrastructure in general. They can give stadiums … but not what matters. There’s no upside for this government, even if everything goes well,” Drausio Giacomelli, head of emerging markets research at Deutsche Bank, said. Moreover, Giacomelli went for the monetary policy of President Dilma Rousseff.
“Brazil has gotten it wrong since the beginning of the Dilma cycle,” Giacomelli said, referring to the central bank’s recent rate hikes. “They put themselves in a situation that is the worst-case scenario for (emerging markets): stagflation—low growth and high inflation.”
Other experts tend to agree with that statement as well. “Inflation is still a problem, and unfortunately in Brazil cutting rates won’t help growth,” Luis Oganes, global head of emerging markets research at JPMorgan Chase, said.