After discussing and reading about financial panics and the economic consequences of loss of confidence, I thought I'd blog about Brazil's buzz in the news. President Dilma Rousseff's re-election has created pessimistic reactions, socially and economically (this article covers reactions over social media, especially Facebook, possibly contributing to Facebook's increased stock price: http://online.wsj.com/articles/after-vote-brazilians-lash-out-on-social-media-1414443541).
Economically, investors are reluctant and skeptical about Rousseff's capabilities and plans to pull Brazil out of its slump. This lack of confidence and skepticism is reflected in the devaluation of its currency and its expectation for slow growth (less that 0.5% according to this article). Although Rousseff promises reform, investors are still not quite confident that she can sustain these promises. Going off of Chang's piece, it seems that investors are showing broader feelings of "bad policy." It seems that they are holding expectations of poor policy initiatives carried over from Rousseff's previous term. According to the article, the only way to "calm" these concerns and further calm the markets is to "quickly name a new economic team, including a finance minister who can reassure investors that the country’s fiscal situation is under control." The problem: empty promises. What are the global implications? Well, if there is loss of confidence internally, especially with quantitative evidence like currency and poor growth statistics, then external confidence probably won't be strong either, discouraging foreign investment. Maybe this devaluation can encourage some export promotion, but for now it looks like the government needs to get moving on these promises, before every Facebook status sh*ts on them.
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