International business professor talks Brazil economic, political crises

In May, Brazil’s Senate voted to put President Dilma Rousseff on trial for impeachment after months of protests and accusations of corruption in her administration.

Rousseff has vowed to fight the allegations, but Brazil’s economic recession and a corruption scandal at the country’s state-run oil company, Petrobras, have plummeted public opinion of Rousseff.

KU professor Melissa Birch says there’s more to the story than allegations of corruption.

“We’ve mostly been hearing about the Petrobras scandal. We’ve been hearing something about the recession in Brazil. We’ve been hearing something about the Zika virus in Brazil. And those have all certainly contributed to the unease that has been growing in Brazil about what’s going on,” Birch said.

Birch is an associate professor of strategic management and international business in the KU School of Business where she teaches courses on business in Latin America, corporate strategy and international trade.

In the last decade, the Brazilian economy experienced considerable growth from the discovery of pre-salt oil and gas deposits, allowing Brazil’s state-run oil company to produce one million barrels of oil a day.

“People have been just ecstatic about the discovery of what they call ‘pre-salt deposits’ — deposits of petroleum that are very, very deep under the sea,” Birch said.

With previously prevailing oil prices, Birch said, the pre-salt layer energy discovery would have been a major source of revenue for Brazil’s economy.

“Many people in Brazil felt their future was assured,” Birch said, “that they would join the ranks of developed nations, that these oil revenues would provide a never-ending stream of revenues to finance development in Brazil.”

And when they were least expecting it, a recession hit Brazil’s economy.

Birch said slower than expected growth in China has been a contributing factor to Brazil’s current recession, as well as a dramatic fall in prices in global energy markets.

While the impeachment proceedings will determine if Rousseff broke public budgeting laws, Birch says Brazil’s economy and the social context are important elements to understand the country’s current political crisis.

Listen to Professor Birch’s full comments on Brazil and Rousseff’s impeachment hearings below.

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