BUENOS AIRES — Recession for Brazil — a giant economy and huge market — will not leave its neighbors unaffected. For starters, other Latin American countries export goods to the nation of 200 million.
Brazil’s GDP is already 2.6% lower than in the second half of 2014, even if observers are a little baffled by the speed and depth of its downturn. Only three years ago, the mood in Latin America’s BRICS nation was one of euphoria.
Now, observers see several likely reasons for recession in Brazil, including slowing demand in its own export markets — notably, China — and ongoing corruption scandals that are unsettling institutional life and investment prospects. The country may even face a credit downgrade that would raise the cost of loans.
As a strategic member of regional trading association Mercosur, any weakness in Brazil can only highlight the dependence of partners like Argentina; for months now, exporters of products like fruit and wine have been feeling the chill of reduced demand in Brazil. The impact on car manufacturing is also becoming evident. Days ago, union sources revealed that General Motors would pause production at its plant in Rosario, northwest of Buenos Aires, every Monday in September.
Fiat took similar steps earlier in Córdoba in northern Argentina. Not for the first time, the continent’s big economies face problems simultaneously, but they may not be resolved via private contacts of corporate VIPs anymore, or at summits of ministers and presidents that had showed increasing political and economic closeness over the past decade.
So now, Brazil’s incipient recession is coinciding with a power transition in Argentina. As Dilma Rousseff struggles into a choppy second presidential term, candidates in Buenos Aires are jostling to succeed Cristina Kirchner at the presidential palace. A new working relationship will have to be forged to help lift the economic fortunes of both countries.
