Over the last three years, the largest economy in South America faced what most experts call the worst recession in its history. As Brazil finally starts to climb out of its economic downturn, it’s time to example just why the economy struggled so much, what impact it has on employment in the region – and what the future might hold.
Brazil’s Economic Struggles Since 2014
Just a few years ago, the future of Brazil’s economy seemed bright. Already the nation with the largest GDP in Middle and South America, it was set to host the FIFA World Cup in 2014 and the Summer Olympic Games in 2016. Unfortunately, the first of these major sporting events also seems to be what sent the country’s economy onto a downward spiral.
For no less than eight consecutive quarters, in fact, the Brazilian markets tumbled. Experts have attributed this downfall to a corruption-fueled government, which handed out hundreds of millions in bribes in order to secure the two biggest sporting events in the year. An international investigation into the corruption led to the impeachment of one president, but the new regime has remained deeply unpopular and struggles with its own corruption allegations.
The impact of the recession has been significant. Brazil’s economy shrank 3.8 percent in 2015, and another 3.6 percent in 2016. Just as importantly, unemployment in the country hit an all-time high of 13.7 percent this past January, leaving 14 million people out of work.
The Impact of Brazil’s Recession on Regional Employment
The connection between a shrinking GDP and rising unemployment rates in the country is devastating, but natural. Companies with less profits cannot afford to pay workers, and shrinking investments have made contingency plans difficult. At the same time, Brazil’s recession has had an important, though more subtle impact on the larger region, as well.
First, it’s vital to consider the impact on South America’s largest economy on its neighboring states. Brazil’s imports from the region dropped 28 percent in 2015, leading to a downturn and stagnation of smaller economies dependent on these imports over the same time frame. Bolivia and Paraguay, two nation’s whose economy relies particularly heavy on exports to Brazil, have especially suffered as a result. As a whole, economies in South America declined by 0.7 percent in 2016.
What impact Brazil’s unemployment rate has (and will have) on its neighboring nations is more difficult to examine. It would not be a surprise, for instance, to see increased migration from workers to neighboring countries (such as Peru), which have far lower unemployment rates. Of course, language and skill barriers could make these types of moves more difficult in practice than in theory, which is probably why we have yet to see a drastic downtown in employment for these countries.
Where Does Brazil Go From Here?
More importantly, then, is the future outlook for Brazil’s economy. If it can turn the corner, the potential negative effects on the region and employment trends may be reversed before they fully take effect. Fortunately, it looks like the first quarter of 2017 offers signs of hope that just that may be the case.
In fact, Reuters reported last week that for the first time in more than two years, Brazil’s economy grew in the first quarter of 2017. The growth (1 percent) is still low, but offers a promising sign after eight consecutive quarters of contraction. With it, the unemployment rate declined slightly, to 13.6 percent in May 2017.
One quarter of growth, of course, is not enough to definitely proclaim Brazil’s recession and employment woes to be over. At the same time, it’s a positive sign that will hopefully continue in the future. For the time being, the country is a labor market worth monitoring. In the future, it could once again become a desirable opportunity for both native and international applicants.
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