It’s not the scandal, stupid.
Last week the Brazilian oil giant Petrobras wrote down the value of its assets by some $17 billion, including $2.1 billion reflecting the impact of bribes and graft. The scandal—in which company executives allegedly received kickbacks in exchange for awarding contracts at inflated values—has prompted worries that it could creep closer to President Dilma Rousseff, who served as the chairwoman of Petrobras, during the years when much of the alleged bribery took place. So far, she hasn’t been implicated.
But as the nation’s attention continues to be riveted by the scandal, Brazil’s economy is decelerating rapidly. Numbers out this morning show that unemployment rose to 6.2% in March, up from 5.9% in February and the highest since March 2012.
The latest numbers highlight the soft patch that Brazil—once a cornerstone of the so-called BRICs bloc of fast-growing developing markets—is currently going through. In its latest World Economic Outlook the IMF forecast that Brazil’s economy will fall into recession this year and contract by roughly 1%. It blames drought conditions that are hampering agriculture as well as weak investment and corporate sentiment. The contraction in Brazil, South America’s largest economy, will be amplified by recessions in Venezuela and Argentina, the IMF said.