Brazil economy enters recession in pre-election blow to Rousseff

Brazil economy enters recession in pre-election blow to Rousseff

Sat Aug 30, 2014 11:50AM GMT

Brazil, which is Latin America’s largest economy, has slid into recession, further weakening President Dilma Rousseff’s position in her re-election campaign.

On Friday, Brazil’s national statistics institute said the country’s gross domestic product (GDP) shrank 0.6 percent in the second quarter and revised its formerly positive growth estimate for the first quarter down to -0.2 percent.

Coming ahead of Brazil’s October presidential and general elections, those figures will damage already low industrial and consumer confidence in what once was a fast-growing regional powerhouse.

The contraction comes with Rousseff locked in a tough fight to win another term in office with latest polls suggesting a major surge in support for in support for Rousseff’s leftist electoral rival, Marina Silva.

An opinion poll has showed for the first time Silva tying with Rousseff in the election’s first round, with both candidates receiving 34 percent of the vote. Previous polls had Silva trailing in the first round.

“Technically, we are in recession…and this is very worrying,” said Silva, adding “Brazil must regain credibility — that is, the only way it will return to growth.”

Meanwhile, Rousseff shrugged off the latest economic data, saying it was in part due to a slew of public holidays which the government granted during the month-long football World Cup in June-July.

“I think this result is just a blip. Brazil has every chance of resumption” of growth later in the year, Rousseff insisted.

While most eyes were on football, industrial activity dipped 1.5 percent in April-June, while second quarter investment slumped 5.3 percent, the IGBE national statistics agency’s figures showed.

The tournament was held amid almost daily protests. Critics say the 11 billion dollars spent on the World Cup should have been used to improve the quality of life for millions of impoverished Brazilians.

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