Support for Brazil’s government is flagging amid political and
economic crises
As emerging market currency kerfuffles go, Brazil’s "Caipirinha Crisis" , where the real fell to a 20-year low,
certainly sounded sweeter than Mexico’s 1994 “Tequila Crisis”, even if the
reality for investors was distinctly bitter. In September last year, the real
fell to the lowest level against the dollar since it was created in 1994 and
rating agencies cut Brazil’s government debt to junk status.
It is not hard to see why many believed the country was heading
for its worst crisis in more than a decade. In 2015, a mounting political
corruption scandal, combined with tumbling commodities prices, concerns about
government spending and an economic slowdown made Brazil the worst-performing
local-currency debt market of the year, according to JPMorgan.
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