Friday, March 4, 2016

“I had not seen anything like” damage to the economy of Brazil – FORTUNE

NEW YORK (CNNMoney) – When Barbara and Allan Alves Araujo married three years ago, had big plans: starting a business, buying a home and a family inciar.

But with Brazil plunging into the worst recession of the last two decades the hopes of a bright future fade. The Brazilian economy shrank by 3.8% in 2015, according to government information published Thursday. That’s the biggest annual drop since 1990 and the country is in its longest recession since the 1930s

“I have not seen anything like this,” Alves, 24, said, while in his balcony overlooking Rocinha, a massive lower middle class favela in Rio de Janeiro where he grew up. “My parents told me about the hard times, but today is really difficult. Prices rise every day. ”

The high school love started working when Brazil entered its golden age.

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In 2011, the South American country was the world’s sixth largest economy, surpassing the United Kingdom. Large oil reserves development and attracted foreign investment, and China became its largest trading partner. Brazil emerged from the global financial crisis almost unscathed.

Now, those good times are over.

Unemployment is rising, consumer confidence is plummeting and the country’s currency, the real, has lost 24% of its value against the dollar in the past year.

The engine behind Brazil’s economy are products such as oil, sugar and coffee. All prices have plummeted in the past two years, leaving very badly to Brazil.

A corruption scandal unprecedented in government oil company Petrobras was another major cause of the recession as confidence in the Brazilian government and business collapsed.

Research by massive bribes led to the arrest of dozens of executives and politicians involved in fraud of 1,000 million dollars, which gave rise to the initiation of impeachment proceedings against President Dilma Rousseff last year.

Read: Brazil recorded in 2015 a deficit unprecedented

The economic problems have hurt the lower middle class was rising, people like Araujo and Alvez, especially.

Both lost their jobs last year. After passing through difficult times, the couple started a business selling chocolate cakes in jars. In the first months, they sold 200 jars per day at 5 reales per piece (about $ 1.25) in their own neighborhood. The business was good.

But when inflation reached its highest point in 13 years, the ingredients became more expensive and their regular clientele can no longer afford their desserts. It has forced them to look for customers who can pay higher prices outside your neighborhood.

plans to open a pastry shop, and even buy a blender industrial grade, were also postponed. A white motorcycle, they had to buy on credit to make deliveries, still you pay monthly installments. And payment becomes increasingly difficult to achieve as interest rates continue to grow in Brazil.

“Everyone is concerned about this,” says Alves. “As interest rates rise in the food, electronics and other goods, no one knows how we will pay for these things.”

Many of the 200,000 residents of Rocinha benefited from government housing subsidies as “Bolsa Familia” has helped millions of Brazilians out of extreme poverty.

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Businesses in the favela and other neighborhoods of Rio de Janeiro have closed their doors, even when the city is preparing to welcome a million people for the next Summer Olympics .

A recent study of one of the largest associations of business owners showed that more than 1,200 stores had to close in 2015 by the fall in sales and the increase in cost of revenues.

Despite the grim landscape, Alves Araujo and have hope for the future.

“There is much uncertainty … At this point, all we can do is save,” Alves said. “But still I have hope that I can give better opportunities for my (future) children”.

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