Brazil: Now What?

These days, being Brazilian comes with a mixed bag of emotions. On one hand, Brazil was the proud host of the highly anticipated 2016 Summer Olympic Games, where the world came together for 17 days in a beautiful display of unity and competition. On the other hand, Brazilian president, Dilma Rousseff, was recently impeached for both her political party and her own participation in an elaborate corruption scandal dated back to Lula’s days as President. Now what? To start: former Vice President Michel Temer has assumed the presidency for the remainder of the current term through the end of 2018. President Temer will have the difficult task of leading Brazil out of a recession. To do that, President Temer will have to focus on the following key points:

Investor confidence. Widespread corruption scandals have permeated Brazil’s economy over the last few years, subsequently vitiating the investment atmosphere and denting the confidence of investors from all over the world. With Dilma ousted from the presidency and many high-profile characters in jail, a sense of order has been established. Investor confidence is already showing signs of improvement and investments are slowly starting to flow into Brazil once more.

Fiscal reform. Measures that facilitate productive activities in an effort to encourage the business environment will be top priorities for pro-business President Temer. Already in the works are measures for labor reform, simplifying the tax code, improving infrastructure, and cutting the red tape that currently makes doing business in Brazil so costly. There are signs that the economy is already picking back up since Temer took over as interim president in May, but there is still a lot of ground to cover.

Political stability. Perhaps President Temer’s biggest challenge will be to unify the country and create the political stability necessary to get things done. In the midst of a massive corruption investigation involving Brazil’s ruling party for the last 15 years—which includes President Lula, who was just indicted for corruption, money laundering, and obstruction of justice-- this will not be an easy task for President Temer. He is seeking to build a strong coalition with members of different political parties in order to gain the support from both the Senate and the Chamber of Deputies.

Brazil has actually been in this position before. In 1992, President Fernando Collor was also impeached for corruption scandals. The period that followed Collor’s impeachment was one of the most productive and remarkable times in the history of Brazil. Can history repeat itself?

By Danilo Kawasaki
Vice-President, COO

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

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