As the economy of Brazil hits rock bottom, others are dragged down with it. The biggest loser of them all is Fortress Investment Group. The hedge fund suffered heavy losses following a string of investments in Brazil. As published in recent market news by the Wall Street Journal, the Group run by Michael Novogratz lost $100 million from investments in the South American country. Brazil lost its investment-grade status when Standard & Poor’s downgraded the nation’s sovereign debt this month. Stockholders are suffering too: Companies listed on Brazil’s main Bovespa stock market have lost $1 trillion in value since early 2011.
What led Brazil to the brink? Some argue its problems stem from red tape, poor infrastructure and a strong currency which have rendered much of industry uncompetitive, as explained by the Wall Street Journal. Another issue remains with Brazil’s tax system, one of the most onerous and convoluted in the world. Citizens and local companies are increasingly frustrated with paying tax rates that rival those of Western Europe but without equal services. Brazil’s barriers to growth, tax corruption and low education levels are catching up with it.
But let’s not make excuses here. The real problem lies in another matter all together.
Polls show Brazilian President Dilma Rousseff is the nation’s most unpopular president since the 1985 return to democracy. Her ratings have plummeted to their lowest point since she took office in 2010, with a recent Datafolha survey showing only 8% approving of her. Rousseff’s political woes have raised the prospect of impeachment proceedings and brought out hundreds of thousands of protestors across the country on Sunday, many chanting “Dilma Out.” This unpopularity is attributed to the current worst corruption scandal in the country’s history. A n investigation of state-controlled oil company Petrobras, Operation Car Wash, has been underway since 2014. In the spring of 2014, 86% of the Brazilian public voiced disapproval of Rousseff’s handling of corruption in the country, and 78% cited corrupt political leaders as a very big problem.
Protests continue as citizens make movements for President Rousseff’s impeachment. Though she survived torture and cancer to become Brazil’s first female president, the former leftist-militant faces yet another challenge of saving her presidency and stanching the deterioration of Latin America’s biggest economy.