Goldman’s BRICs Story Is Crumbling—-Brazil Hitting Rock Bottom and Getting Worse

For anyone who might have missed it, Brazil is in trouble.

The country is “at the center of a triple unwind of EM credit, China’s leverage, and US monetary easing” (to quote Morgan Stanley) and as Goldman recently pointed out, faces a stagflationary nightmare.

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Last quarter, Brazil suffered through the worst growth-inflation mix in over ten years. As Goldman put it, “since 1Q2004 there has not been a single quarter in which we had simultaneously higher inflation and lower growth than during 2Q2015.”

And then there’s the twin deficit problem. Here’s Goldman again:

Over the last 11.5 years, we cannot identify a month with a strictly-worse fiscal-CA deficit outcome than that of May-15 (lower left quadrant is empty). In fact, at 7.9% of GDP the fiscal deficit is now the widest it has ever been since Jan-04, and there were only a few months (5 out of 137 months in the sample) were the current account deficit was marginally wider than currently.

Meanwhile, as we mentioned on Monday, Dilma Rousseff is now the most unpopular democratically elected president since a military dictatorship ended in 1985, with an approval rating of just 8%. In a recent poll, 71% said they disapprove of the way Rousseff is doing her job… and two-thirds would like to see her impeached. Here’s Bloomberg summing up the situation:

To be sure, the president faces a host of challenges this month, not least of which is a nationwide protest planned for Aug. 16.


The country’s audit court also must decide whether the government broke the fiscal law by doctoring budget results last year. A ruling against the government could provide the legal foundation to start impeachment hearings, opposition lawmakers say. Her administration says previous presidents used the same practices.


Investors are concerned that the political instability will push Brazil into


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