Brazil Seen by Eurasia Group as One of Top Risks in 2016

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Despite the optimistic forecast by Brazilian President Dilma Rousseff during her New Year Day’s message to the nation, the country is expected to face economic and political challenges in 2016. With rising unemployment and inflation, Brazil has made it into Eurasia Group’s top ten risks for global investors.

“President Dilma Rousseff is fighting for her political survival, and the country’s political and economic crisis is set to worsen in 2016,” stated the international consultancy firm in a report sent to clients.

According to Eurasia if President Rousseff does survive impeachment proceedings this year ‘her government won’t gain the political boost necessary to move on the economic reforms needed to tackle the country’s growing fiscal deficit.’

Economists forecast that unemployment rates should continue to increase in 2016 due to the decline in economic activity levels. “The industry has been registering weak results for awhile, facing loss of competitiveness and decline in investments,” Renaut Michel, vice-director of the Economics Department at Universidade Federal Fluminense (UFF) said. “My forecast is that (2016) will continue very negative for industry, affecting in some way trade and services [sectors].”

As for inflation Brazil’s Central Bank (CB) latest Focus Report, based on the survey of more than one hundred financial institutions, shows economists increased this year’s inflation forecast from 6.86 percent to 6.87 percent. The forecast is well above the government’s target of 4.5 percent and also above the ceiling of the target, of 6.5 percent.

Despite the negative forecasts, the President continues optimistic about the new year. “I know that we have had a difficult year but I am optimistic with 2016,” said the President in social media on the last day of 2015. “I believe in the strength of our people and on the agenda we have set up for Brazil.” According to Rousseff the agenda of reforms put forth by her administration will ‘deepen democracy and strengthen the basis for sustainable growth’.