Brazil cans carnival as recession bites

Pack away the nipple tassels and dismantle the floats: carnival has been cancelled.

Towns and cities across Brazil are being forced to scrap the annual carnival parade as the country is braced for what is expected to be the worst recession since at least the 1930s.

The traditional five-day celebration, set for early February this year, normally offers respite from Brazil's troubles — even the 2008 global financial crisis failed to damp spirits and spending.

But with the country stuck in a deep recession, unemployment and inflation rising, and President Dilma Rousseff's government mired in the biggest corruption scandal in the country's history, Brazilians are in no mood to party.

Members of Unidos da Tijuca Samba School during their parade at 2014 Brazilian Carnival at Sapucai Sambadrome on March 03, 2014 in Rio de Janeiro, Brazil.
Buda Mendes | Getty Images
Members of Unidos da Tijuca Samba School during their parade at 2014 Brazilian Carnival at Sapucai Sambadrome on March 03, 2014 in Rio de Janeiro, Brazil.

Campinas, home to 3m people in São Paulo state, is among the cities that has been forced to rein in the festivities, including withdrawing public funding for its much-loved parade by local samba schools. Gabriel Rapassi, the city's director of culture, said the local government could not afford this year's carnival bill of R$1.3m ($322,000) due to a sharp drop in sales tax revenues from struggling local businesses.

"Non-essential services are the first to suffer," Mr Rapassi said. "2015 was already a very difficult year for us and now we are hearing that 2016 will be even worse."

Carnival has also been cancelled in Porto Ferreira two hours' drive away — the first time the parade had been called off since the city began organising the event more than 30 years ago. Porto Ferreira's mayor said the decision was taken to help save the R$120,000 needed to buy a new ambulance.

Macapá, capital of the northern state of Amapá, and Lavras do Sul in the south have also put festivities on hold, with more municipalities expected to follow suit in the next couple of weeks.

While unofficial street parties are likely to go ahead, the celebrations are set to be more muted.

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The hedonistic carnival celebration is considered the most important holiday across Brazil, with Rio de Janeiro's spectacular parades attracting close to 1m tourists last year. While parties fill the streets, the highlight in most cities is the official parade organised by samba schools with the financial backing of the local government.

Olga Valles, owner of Condal, one of Rio de Janeiro's largest producers of carnival masks, says sales are down almost a third ahead of the year's festivities. She admits that she cannot recall a worse year for the business since she arrived from Spain in 1994.

"The economic situation here is even worse than most people imagine. Shops that were spending R$40,000-R$50,000 with us are now placing orders for R$3,000," Ms Valles said.

Claudia Sakuraba, who runs the Carnaval Store in São Paulo that supplies fabric for more than 90,000 costumes a year, said 2016 looked like being the toughest year since she set up more than a decade ago, with sales 15 per cent lower.

"So many shops near me have gone bust because of the recession," Ms Sakuraba said.

As well as uncertainty over Brazil's economic and political future, the falling real has also made imported fabric more expensive.

The gloom is evident in the Getulio Vargas Foundation's consumer confidence index, which has fallen to new lows in recent months. Ms Rousseff's approval ratings have shown a similar trajectory.

Alberto Ramos, chief Latin America economist at Goldman Sachs, said: "The anxiety is created by a dysfunctional macro picture where growth continues to contract, unemployment is going up and inflation remains in double digits."

Brazil's economy contracted 3.7 per cent in 2015, according to economists polled by the central bank. They predict it will shrink by a further 2.99 per cent this year.

The public sourness is all the more acute because many Brazilians believe the economic problems were self-inflicted.

Ms Rousseff's ruling Workers' party, emboldened by the proceeds of the commodities boom, spent much of its past 13 years in power pursuing populist and expansionary fiscal policies, but ignoring what economists say are the wider structural reforms needed for sustainable growth.

While this fiscal largesse helped to lift millions out of poverty and empowered poorer Brazilians, it also paved the way for the current crisis by leaving the economy vulnerable to the collapse in commodities prices.

Fitch last month became the second credit rating agency to cut Brazil's debt to junk status amid concerns over its growing fiscal deficit. Ms Rousseff also faces impeachment proceedings, while a vast corruption scandal at Petrobras, the state-controlled oil company, has implicated many in her ruling coalition.

Poorer Brazilians have on carnival days traditionally worn masks of some of their heroes — including Ms Rousseff and her predecessor Luiz Inácio Lula da Silva. But even they are not popular with revellers this time, according to Ms Valles.

"Only our witch and monster masks are doing well," she said. "Politicians are not having a good year."