South America's largest economy slipped into a recession in the first half of the year, making President Dilma Rousseff's uphill battle for re-election that much tougher. Conway G. Gittens reports.
A recession. Not the word you want to hear as you head into a presidential election, but that's exactly what's happening in Brazil. The once red-hot economy is in a slump, shrinking by six-tenths of a percent in the second quarter, which means instead of scoring a goal with the World Cup, hosting the games actually hurt the economy. Another problem: major trading partners in Latin America are down on their luck too. Government economist Rebeca Palisa: SOUNDBITE: REBECA PALISA, CO-ORDINATING MANAGER OF NATIONAL ACCOUNTS FOR IBGE (PORTUGUESE WITH ENGLISH TRANSLATION) SAYING: "We saw the capacity of the automobile industry fall. What happened is that it is being negatively influenced by low exports to Argentina and Venezuela and there was an increase in January of this year for taxes on industrialized products in this industry. It didn't return to former levels but there was an increase. Some internal problems exist with the renovation of the fleet." The auto industry alone accounts for 20 percent of the country's economic activity. Add to that, rising prices and plunging investment and you have the recipe for Brazil's first recession since the financial crisis. If you would think the Brazilian stock market fell in response, you're wrong. The Bovespa rallied to its highest close in more than a year and a half. Bad economic news is seen as bad news for President Dilma Rousseff, who's left-leaning policies are taking the blame for the downturn, and investors think anything that hints at her loss in October - hints of better economic times ahead.