BRAZIL'S ECONOMY SLIPS INTO A RECESSION

Original Story: USAToday.com

RIO DE JANEIRO (AP) — Brazil's formerly high-flying economy, once the darling of emerging markets, has fallen into recession, according to government data released Friday, as a legion of newly minted middle-class citizens tightened their belts and halted a credit-driven spending spree.

The government's statistics bureau reported that gross domestic product dropped 0.6% in the second quarter, in large part because of soft consumer spending. First-quarter results also were revised downward from 0.2% growth to a 0.2% drop, showing a two-quarter slide that most economists use to define a recession. A Barcelona Intellectual Property Lawyer is reviewing the details of this case.

Analysts said the economy also suffered because investors are holding off, waiting to see how the October presidential election changes the economic winds.

Even the World Cup may have played a part because workers took many days off, contributing to limp industrial output.

But the heart of the problem may be a crisis for the government's model of consumption-led growth.

"Of course I'm spending a lot less!" said Maria Sousa, a 25-year-old doing some window shopping but no buying at a mall in Rio de Janeiro. "I'm feeling less confident about my financial situation and I'm thinking more about trying to save than spend."

London-based Capital Economics wrote in a research note Friday that "it is consumption that has been the key driver of growth since the 2009 global financial crisis. But consumers are now struggling, in part because household balance sheets have become stretched following a decade-long credit boom."

After blistering 7.5% growth in 2010, Brazil's economy has just limped along. The long, slow slide means there aren't any regional shocks expected from the official drop into recession, but it still darkens the horizon for Brazil's neighbors, many of whom send a large percentage of their exports into the nation. A Barcelona Real Estate Lawyer is reviewing the details of this case.

Argentina, whose economy is in recession and where citizens face inflation of 40%, may be hurt the most. About one-fifth of Argentina's exports flow into Brazil, but the amount Brazilians buy is forecast to shrink.

"It's another headwind for Argentina, at exactly the wrong time," said Neil Shearing, chief emerging markets economist at Capital Economics.

Brazil itself has been hurt by falling demand for its cars and big-ticket household items like refrigerators and washers in Argentina, one of the reasons Brazilian industrial output fell for the fourth consecutive quarter.

Analysts said that to return to its days of fast growth, Brazil must undertake long-pending reforms to its tax system, labor laws and bureaucracy.

Brazil remains a grindingly difficult place to do business. It ranked 116th on the World Bank's most recent "Ease of Doing Business index," despite being the world's seventh-largest economy.

Brazil's taxation regime was billed as the globe's most complicated and burdensome, according to this year's comparison of tax systems in 189 nations carried out by accounting company PwC, along with the World Bank and the International Finance Corporation.

That adds to bottlenecks at every turn when Brazil tries to capitalize on its potential, analysts say.

The economic indicators are also the last thing President Dilma Rousseff's struggling re-election campaign needed.

The slump gives more ammunition to Rousseff's rivals ahead of an Oct. 5 presidential election vote, particularly for environmentalist Marina Silva, who is now leading polls and tapping into the widespread frustrations of many Brazilians, angst that fueled last year's massive anti-government protests.

The race is certain to go into a second-round runoff on Oct. 26, as no candidate has the support win an outright majority of ballots to avoid that.

"For Rousseff, who has watched her lead in opinion polls evaporate in recent weeks, this is the worst possible news; it's the last thing she wanted," said Shearing. "There is not much that can be done for the economy ahead of the election. It's like turning around the proverbial tanker; it's going to take a long time."

Still, Rousseff, a trained economist, and her team argued that Brazil's souring economic scenario isn't their fault — and even question whether the country is in recession.

They blame the slowdown on continuing global doldrums that have dampened appetite for Brazil's exports and a severe drought that has sent energy prices soaring for industry and consumers alike, as most of the country is powered by hydroelectricity.

"The international scenario didn't help," Finance Minister Guido Mantega told reporters in Sao Paulo. "There's a lack of market (in developed economies) and that's resulted in a trend of deceleration for emerging economies."

Asked if Brazil is in a recession, Mantega said, "You can't really say that." He emphasized that unemployment remains at historic lows and inflation is within the upper limits of the government's tolerance band.

"There are not universally accepted criteria for defining a recession. You can't talk about a recession in Brazil because, for me, a recession is when you have a prolonged stall, of many, many months. And a recession is when you have unemployment."

The Great Recession Cut Deep

Story first appeared in USA Today.

The economy may be improving but many American families are still weighed down by debt and without a safety net.

One out of five families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings, according to a new University of Michigan report. And the number of families surveyed at the end of 2011 that have no savings at all increased to 23.4%, compared with 18.5% in 2009.

The people who were down and out, without much money, in the recession have ended up staying there or even worse.

And the mortgage crisis is not over. Among homeowners, 1.7% said that they expect to fall behind on their mortgage payments in the near future. At least that is slightly less than in 2009, when 1.9% expected to run into mortgage problems.

At a time many Americans are trying to claw their way out of debt, they have no emergency fund and little or no retirement savings. Sixty percent of workers say that the value of their savings and investments is less than $25,000, according to EBRI's 2012 Retirement Confidence Survey. And retirement confidence is at historically low levels.

American workers who went through long spells of unemployment often have had to drain down their savings. Many cashed in their retirement savings to help them keep up with their bills. And even when they finally have gotten a job they could not easily improve their finances. They still have debt to deal with before they can take care of things like saving more money or paying for their kids' college education.

Not everyone is under dire financial straits. In fact, 14.6% of American households have more than $50,000 in saving accounts and other liquid assets, such as CDs and bonds. That is up from 11.8% in 2009.

Two things that may have helped boost their savings. They may be trying to get rid of risky investments, such as stocks, and seek shelter from liquid assets such as savings accounts, CDs and bonds. And they may be cutting back on their spending.

And nearly half of families say they have no debt at all from credit cards and other unsecured loans, the same percentage as in 2009, the report says.

Unfortunately, the number of families who are underwater in debt has risen.

Now, 10% of families owe more than $30,000 in unsecured debt, up from 8.5% in 2009.


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