The economy of Sao Paulo, Brazil, once a major bright spot for the country, is now taking a serious downturn. The labor market in the industrial city is declining rapidly, as nearly 20,000 jobs are leaving the city every month.
The rate of unemployment in the city has reached 7.6% this year. By the end of last year, it was only at 4.3%. The main reason for this is the decline of the automotive industry in the country, as Sao Paulo is known for being the primary vehicle hub for Brazil. Companies like Ford and Daimler are feeling the pain in the once thriving city.
Problems in the government are also having a negative impact, as Brazilian President Dilma Rousseff is facing impeachment. Meanwhile, the country is falling deeper into a recession, as many citizens are falling further into debt due to largely uncontrolled credit spending.
It’s not unlike the recent financial crisis a few years ago in the United States, where people purchased homes they couldn’t afford, eventually resulting in a mass of essentially worthless mortgage-backed securities.
One year ago, a major scandal was revealed at Brazil’s state oil company, Petrobras. The news came after Brazil had recently entered into a recession.
The result has been devastating to the Brazilian economy. Its currency, the Brazilian Real, has experienced the largest decline out of every major world currency this year. Meanwhile, inflation rates have nearly reached double digits, and the country’s budget deficit is the largest in more than 20 years.
Standard & Poor has declared the country’s credit rating to be “junk”, as the economy is expected to contract by 3% this year. Unemployment is predicted to reach 10% by the end of next year.
The trend is a major fall for the BRIC nation that has been largely viewed as an emerging economic powerhouse for many years. Some even called Brazil “the next China”. The woes range all the way from the country as a whole to the local economies of small towns.
Unemployment is hitting the country particularly hard. Shopping malls that were once packed with people are now completely empty. Stores are being shut down left and right. Defaults on loans are a daily occurrence. Loan rates are too high for new businesses to emerge.
The country’s falling rate of production and rising rates of inflation and unemployment are not expected to improve any time soon. Brazil is deep into crisis, and it could be years before things get better.