Brazil's president is battling scandal and low poll numbers, inflation and unemployment are soaring, and ratings agencies are taking the knife to its credit rating. Is there any good news investors can count on from Latin America's largest economy?
There are some bright spots, analysts say. Yet for now, the immediate term outlook is overwhelmingly grim for the country that put the 'B' in the acronym BRICS — shorthand for the most attractive emerging market economies investors once considered a sure bet.
As Brazilian president Dilma Rousseff combats a slumping economy and corruption accusations, the country's inflation surged above 10 percent while unemployment jumped to 7.9 percent, according to the latest official data. The dour state of affairs has Barclays forecasting a 4 percent economic contraction this year, followed by 3.3 percent shrinkage next year, the investment bank said in a research note last week.
According to Carlos A. Primo Braga, a professor of international political economy at Switzerland's IMD Business School, the sinking real may be a blessing in disguise for tourists and foreign investors. Braga estimates that a steak lunch in a top Brazilian restaurant in Brazil that would have easily cost roughly $120 per capita last year now costs almost half that much. At the same time, Brazilian real estate prices have plummeted, leading some big investors to take advantage of rock bottom prices. That may eventually help lift sentiment and improve growth prospects.
The Brazilian real "has experienced one of the most dramatic depreciations among currencies from emerging economies over the last 12 months," Braga explained to CNBC. On the upside, however, the extreme adjustment will "help the tradable sector of the economy improve its international competitiveness," he said, as it makes Brazil's exports cheaper abroad.