Daily Archives: August 10, 2016

By Felipe Rezende

Part I

This series will discuss at length the underlying forces behind Brazil’s current crisis.

A consensus has emerged in Brazil (and elsewhere) blaming Rousseff’s “new economic matrix” policies for the country’s worst crisis since the Great Depression (see here, here, here, here, and here).  With the introduction of policy stimulus through ad hoc tax breaks for selected sectors seen as a failure to boost economic activity and the deterioration of the fiscal balance – which posted a public sector primary budget deficit in 2014 after fifteen years of primary fiscal surpluses – opponents argued that that government intervention was the problem. It provided the basis for the opposition to demand the return of the old neoliberal macroeconomic policy tripod and fiscal austerity policies. There was virtually a consensus that spending cuts would create confidence, reduce interest rates, and stimulate private investment spending. Fiscal austerity, according to this view, would be expansionary and pave the way for economic growth.

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