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Page added on March 6, 2016

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Economic Collapse of South America

Economic Collapse of South America thumbnail

The 7th largest economy on the entire planet is completely imploding.  I have written previously about the economic depression that is plaguing Brazil, but since my last article it has gotten much, much worse.  During 2015, Brazil’s economy shrank by 3.8 percent, but for the most recent quarter the decline was 5.89 percent on a year over year basis.  Unemployment is rising rapidly, the inflation rate is up over 10 percent, and Brazilian currency has lost 24 percent of its value compared to the U.S. dollar over the past 12 months.

At this point, Brazil is already experiencing its longest economic downturn since the Great Depression of the 1930s, and things are getting worse for ordinary Brazilians every single day.  The following comes from CNN…

But with Brazil plunging into its worst recession in over two decades — hopes for a brighter future are fading. The Brazilian economy shrank 3.8% in 2015, according to government data published Thursday. That’s the biggest annual drop since 1990 and the country is in its longest recession since the 1930s.

“I have never seen anything like this,” said Alves, 24, as he stood on his balcony overlooking Rocinha, a massive lower middle class neighborhood or favela in Rio de Janeiro where he grew up. “My parents would tell me about hard times, but today it is really tough. Prices are going up every day.”

So how did this happen?

Well, there are a couple of factors that are really hurting South American economies.

Number one, during the “boom years” governments and businesses in South America absolutely gorged on debt.  Unfortunately, many of those loans were denominated in U.S. dollars, and now that the U.S. dollar has appreciated greatly against local South American currencies it is taking far more of those local currencies to service and pay back those debts.

Number two, collapsing prices for oil and other commodities have been absolutely brutal for South American economies.  They rely very heavily on exporting commodities to the rest of the world, and so at the same time their debt problems are exploding they are getting a lot less money for the oil and industrial commodities that they are trying to sell to North America, Asia and Europe.

I want you to pay close attention to the following chart and analysis from Zero Hedge.  As you can see, the economic problems in Brazil appear to be greatly accelerating…

“The Brazilian economic downturn took a real turn for the worse in February,” according to Markit’s Composite PMI, which collapsed to record lows at 39.0. Despite a slightly less bad than expected GDP print this morning (still down a record 5.89% YoY), hope was quickly extinguished as PMIs showed economic activity continuing to contract at a record pace, job losses accelerating, and manufacturing’s collapse accelerating. As Market sums up, “With the global economy also showing signs of slowing, which will impact on external demand, it looks as if the downturn is set to continue to run its course in the coming months.”

GDP was a disaster (but better than expected)

Brazil GDP - Zero Hedge

And of course Brazil is not the only South American economy that is a basket case right now.  In fact, things in Venezuela are far worse.  In 2015, the Venezuelan economy shrunk by 10 percent, and the official rate of inflation was a staggering 181 percent.

Could you imagine living in an economy with a 181 percent inflation rate?

As prices have escalated out of control, citizens have attempted to hoard basic supplies in advance, and this has resulted in food shortages that are absolutely frightening…

Cardboard signs on the door warning of “No bread” have become increasingly common at Venezuelan bakeries.

Venezuela gets 96 percent of its foreign currency from oil exports, and as crude prices have plunged, so have the country’s imports — among them wheat.

The leftist government of President Nicolas Maduro has tightly controlled access to hard currency, and this has affected imports ranging from medicine to toilet paper. Now it is seriously affecting imports of wheat, which Venezuela does not grow.

Add to this the soaring inflation rate — 181 percent in 2015, the world’s highest — and you see why customers are mainly interested in buying basic food items such as bread.

Here in the United States, there are still people who doubt that an economic crisis is happening.

But in Venezuela and Brazil there is no debate.

Unfortunately, what is happening in Venezuela and Brazil is also slowly starting to happen to most of the rest of the planet as well.  It is just that they are a little farther down the road.  Economic and financial bubbles are bursting all over the world, and I like how author Vikram Mansharamani described this phenomenon during a recent interview with CNBC…

Deflationary tides are lapping the shores of countries across the world and financial bubbles are set to burst everywhere, Vikram Mansharamani, a lecturer at Yale University, told CNBC on Thursday.

“I think it all started with the China investment bubble that has burst and that brought with it commodities and that pushed deflation around the world and those ripples are landing on the shore of countries literally everywhere,” the high-profile author and academic said at the Global Financial Markets Forum in Abu Dhabi.

And of course the evidence of what Mansharamani was talking about is all around us.

Just this week we found out that Chinese state industries plan to lay off five to six million workers, U.S. factory orders have now fallen for 15 months in a row, and the corporate default rate in the United States has now risen above where it was at when Lehman Brothers collapsed.

There are some people that would like to point to the fact that stocks have bounced back a bit over the past couple of weeks as evidence that the crisis is over.

If they want to believe that, they should go ahead and believe that.

Unfortunately, the truth is that the hard economic numbers that are coming in from all over the world tell us very clearly that global economic activity is slowing down significantly.

A new global recession has already begun, and the pain that is already being felt all over the planet is just the beginning of what is coming.

The Economic Collapse



28 Comments on "Economic Collapse of South America"

  1. Northwest Resident on Sun, 6th Mar 2016 9:56 am 

    No end in sight. This is the FINAL bust, the one from which there is will be no following boom to launch the world economy out of the tailspin it is trapped in. The planet’s resource base is all used up with only the bitter dregs remaining, while at the same time the human population and demands on those diminishing resources are increasing exponentially. The global economy now is barely creaking along, powered by the fumes of massive debt creation and daily doses of propaganda. No end in sight…

  2. onlooker on Sun, 6th Mar 2016 10:02 am 

    This collapse actually of South American economies has its roots in neoliberal capitalism and the imposition of the debt regime upon South America. With this debt regime came what is known as Structural Adjustments Programs (SAP) delineating among other things: cuts in social spending, gearing of economy for import/export, wage cuts, privatization, open borders (globalization). All this coordinated, organized and enforced by international institutions such as World Trade Organization, IMF, World Bank and of course further enhanced by Trade Agreements. What is actually is, is a deeply exploitative regime intended to profit Trans National Corporations and the wealthy countries at the expense of the poor countries and especially the poor people. So even before plunging oil and commodity prices and China’s downturn set in motion deflationary pressures, South America economies were straining under onerous debt and lack of a vibrant domestic economy all due to outside influences adversely affecting the positive development of these economies

  3. CAM on Sun, 6th Mar 2016 10:11 am 

    Well, maybe! There might be a few bounces left, but few seem to realize that the dynamics of the game (Capitalism) have changed irrevocably. Resources of all descriptions have become harder to come by and more expensive. While dramatic action might ameliorate some of the pain, nowhere in sight is any significant positive action being taken. And all the while the world population continues to expand and critical resources are burned and/or frittered away.

  4. Northwest Resident on Sun, 6th Mar 2016 11:06 am 

    CAM — There probably are a few bounces left, and if so, then those will be debt and propaganda fueled bounces. Minor blips on what will otherwise be a long term straight line down, growing ever steeper as time passes and eventually going into full cliff-dive mode. A bounce or two does not a BOOM make!

  5. penury on Sun, 6th Mar 2016 11:25 am 

    South America may serve as the poster child for collapse at the moment, however look at the rest of the world economies are just a few degrees behind,collapse like rust will never sleep and the slow and steady decay of our society and our economy and our intelligence does not auger well for hom sapiens.

  6. twocats on Sun, 6th Mar 2016 11:38 am 

    Olympics are in 5 months and I’ve been following the lead-up – could be a wake up call.

  7. paulo1 on Sun, 6th Mar 2016 11:43 am 

    Do you think the Olympics will go ahead? They may turn violent.

  8. onlooker on Sun, 6th Mar 2016 11:49 am 

    I have heard lots of problems exist in Brazil with Olympics not the least of which the waters where the swimming and supposedly drinking is taking place are contaminated as Brazil has been having so much problems with its water supply.

  9. onlooker on Sun, 6th Mar 2016 12:14 pm 

    In fact considering that a big event like the Olympics does not benefit the poor but rather wealthy people and Corporations and considering how corrupt and unequal Brazil is already and considering how ill prepared they are to host this event, I think the Olympics in Brazil should be boycotted by all countries and/or cancelled

  10. sunweb on Sun, 6th Mar 2016 12:17 pm 

    Onlooker – I would like to use your comment on Facebook. Somewhat like Confessions of an Economic Hit Man: John Perkins

    This collapse actually of South American economies has its roots in neoliberal capitalism and the imposition of the debt regime upon South America. With this debt regime came what is known as Structural Adjustments Programs (SAP) delineating among other things: cuts in social spending, gearing of economy for import/export, wage cuts, privatization, open borders (globalization). All this coordinated, organized and enforced by international institutions such as World Trade Organization, IMF, World Bank and of course further enhanced by Trade Agreements. What is actually is, is a deeply exploitative regime intended to profit Trans National Corporations and the wealthy countries at the expense of the poor countries and especially the poor people. So even before plunging oil and commodity prices and China’s downturn set in motion deflationary pressures, South America economies were straining under onerous debt and lack of a vibrant domestic economy all due to outside influences adversely affecting the positive development of these economies

  11. onlooker on Sun, 6th Mar 2016 12:26 pm 

    Sun, you have my permission haha. But with the disclaimer that I am not an economic hit man haha. Glad you also agree. Yes I have heard about this book and author. I think he had a bout of conscience that compelled him to write the book. I first hand account of disgusting tactics and hints of even more disgusting ones such as the School of the Americas training military and police forces in South America to kill and torture.

  12. sunweb on Sun, 6th Mar 2016 12:52 pm 

    Thanks onlooker – our tactics since our inception as a nation (and certainly before) not a model for peace.

  13. shortonoil on Sun, 6th Mar 2016 12:53 pm 

    We are seeing the first stages of the collapse of world’s petroleum industry. The weakest will go first, but eventually all of it will go. When it does it will take the rest of the world’s economy with it. For those who are aware that being forewarned is to be forearmed, observing what is happening to other nations is a very good example of what will be needed to prepare for what is going to happen to every nation on earth. Of course, even Noah had a hard time convincing the neighbors that it was going to rain really hard. Remember, that what the neighbors say is not anywhere near as important as getting that damn elephant on board.

  14. GregT on Sun, 6th Mar 2016 1:03 pm 

    More of the same:

    https://www.youtube.com/watch?v=0CzS6eHqtnQ

    A very good documentary on the Argentinian collapse of ’04, and the events leading up to it. Starring the ‘usual suspects’.

  15. onlooker on Sun, 6th Mar 2016 1:12 pm 

    And I have to add Americans wonder why they don’t seemed to be liked around the world. ummm wonder why.

  16. Banal on Sun, 6th Mar 2016 4:05 pm 

    Oh great. Now we’ve got a serious economic implosion on the horizon, the diffusal and expansion of advanced military technology proliferating. Its comforting to know that death is either like being in the middle of a nap or religion may have some merit.

    At least it’ll be an interesting next couple of decades now that the mass famines, interstate wars, and political extremism predicted earlier have already started in Africa, the Middle East, and Asia, respectively.

    Prosperous? Not a chance. Our political establishment, rather than recognizing that *now* is the time to drop the status quo and begin circling the wagons for what will likely be *at minimum* some turbulent times instead still sincerely believe in the globalist political mantra that will put us at a serious weakness later.

  17. onlooker on Sun, 6th Mar 2016 4:18 pm 

    Yes Banal, they are trying to salvage business as usual by any means which is demonstrably futile and counterproductive to replacing our ways of living with something more commensurate with a declining and degraded Biosphere and the reality of scarcity rather than the abundance we once knew.

  18. Rodster on Sun, 6th Mar 2016 5:30 pm 

    shortonoil:

    the rest of the world’s economy with it. For those who are aware that being forewarned is to be forearmed,

    ———————————————
    The problem is, a fraction of the population doesn’t give a shit until it smacks them in the head. What’s the saying? “A recession is when you lose YOUR job and a depression is when I lose mine”.

    And world leaders know full well the end game of this complex interconnected fraudulent financial, monetary and global eCONomy. Therefore it’s pedal to the metal until the car hits the brick wall and hopefully it won’t implode on the watch of who’s currently in office. Which is why Ben Bernanke got out and Obama is hoping the house of cards won’t implode while he’s in office.

  19. geopressure on Sun, 6th Mar 2016 6:14 pm 

    1) Brazil is a BRICKS Nation…
    2) Brazil was awarded the Olympics over the U.S.
    3) Brazil has refused Obama’s Pleas that they increase their crude oil production so that the U.S. can continue to pushing the “Oil Glut” Narrative just a little longer… The nerve of these guys…

    That’s 3 strikes, therefore Obama has destroyed every aspect of Brazilian life that he has the ability to manipulate… They MUST pay for their transgressions… If they will not take instructions from us & kiss the ring, then they should be replaced with humans who are more inclined to do so… Unless they are prone to voting democratic, in which case they should migrate to TX, immediately!!!

    The same thing that has been done to Venezuela & to Saudi Arabia (both of whom refused to increase production)…

    If this was Star Wars & not the Real World, the U.S. would be the Empire… Most americans have no idea that their tax dollars are spend oppressing people all over the world…

    *Everyone knows that this is the Matrix… Not Star Wars or the Real World…

  20. geopressure on Sun, 6th Mar 2016 6:23 pm 

    Shortonoil: “We are seeing the first stages of the collapse of world’s petroleum industry. The weakest will go first, but eventually all of it will go”

    You must not be keeping close track of the supply/demand situation…

    The Price of oil is on the verge of taking off… 189 Million BBLs worth of open short position on the Nymex alone… The prefect storm for a HUGE short-squeeze is brewing…

  21. geopressure on Sun, 6th Mar 2016 6:29 pm 

    http://finviz.com/futures_charts.ashx?t=CL&p=d1

  22. geopressure on Sun, 6th Mar 2016 6:29 pm 

    http://finviz.com/futures_charts.ashx?t=CL&p=d1

  23. theedrich on Mon, 7th Mar 2016 1:58 am 

    At this point, it is irrelevant to go over the culprits and reasons for the collapse.  The issue is:  what is going to happen now? 

    Well, we already know.  Latin America is going to come north and become undocumented Democrats.  The anti-White tear-jerkers and genosuicidists will publish and broadcast every sob story in the book to get them into Freebieland.  And the Latinos will bring all of their neat cultural diversity with them.

    Like narcotics, thievery and murder.  Not to mention overloading the social support system to the point of collapse.

  24. Davy on Mon, 7th Mar 2016 6:28 am 

    Brazil is actually in a relatively good position from a collapse point of view. In some ways it is those countries that start the failure process sooner and with less shock that are going to adapt better to the end of globalism. Greece is a prime example. Some like Nigeria are in a different class because of the severe overpopulation. Nigeria could very well get ugly. Venezuela is probably OK because of a much smaller population and the ability to grow food and space to disperse into.

    Brazil is a global agricultural bread basket. Everyone especially Asians should be concerned about economic problems in Brazil. Brazil like the US, supplies a significant amount of the basics of the food chain we find in grains and animal protein. Brazil is not likely to implode too far because of these basic economic strengths. It will probably not be the oil exporter everyone thought they would be. It is likely the industrial sector is going to die on the vine. The big question is climate change and Brazil. Drought is playing havoc on Brazil and the Amazon. That should be a bigger world concern than the economic mess they are in.

  25. farmlad on Mon, 7th Mar 2016 8:42 am 

    Davy I Agree Brazil is actually in a relatively good position from a collapse point of view. Unlike the US, The population in Brazil’s vast countryside have not been spoiled, they are tough and conected to reality, the enterpenurial spirit is thriving. The folks in their mega cities are tough too, but that can only go so far,like we are seeing today in syria, where resources are almost nonexistant.

    I wish we would have more coverage on whats happenning on the ground in Syria.

  26. Richard Ralph Roehl on Mon, 7th Mar 2016 8:58 am 

    As a whole (and ass-a-hole) humans create the messes that they suffer.

    Human baboonies are colorful, creative and imaginative… but they lack prescience and common sense.

    We predict the United States of Perpetual War Profiteering will NOT exist by 2050-2060… and the rest of humanity will be perched at the edge of extinction by the end of the 21st century.

    It’s okay. The host organism (Earth) is 4.6 billion [4,600,000,000] years old. It will continue without humanity… without Jesus or Muhammad-mad-mad or Bruce Kaitlyn’s dick. Indeed! 5000 Earth years from now… the surface of the Earth will be a radically different place.

  27. kanon on Mon, 7th Mar 2016 9:58 am 

    Brazil has an historic drought with major cities near or actually running out of water. Subsequently the economy and political system are in crisis. The drought is not mentioned as a causative factor. Typical.

  28. Kenz300 on Mon, 7th Mar 2016 10:07 am 

    Poverty, high unemployment, slums, crime, filth in the streets…………

    Too many people……….create too much pollution and demand too many resources….

    China made great progress in moving its people out of poverty…….one reason was slowing population growth…..

    If you can not provide for yourself you can not provide for a child.

    CLIMATE CHANGE, declining fish stocks, droughts, floods, air water and land pollution, poverty, water and food shortages all stem from the worlds worst environmental problem……. OVER POPULATION.

    Yet the world adds 80 million more mouths to feed, clothe, house and provide energy and water for every year… this is unsustainable… and is a big part of the Climate Change problem

    Birth Control Permanent Methods: Learn About Effectiveness

    http://www.emedicinehealth.com/birth_control_permanent_methods/article_em.htm


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