Protests complicate situation in Brazil

Brazilians last Sunday, protested across streets calling for step down of President Dilma Rousseff. People all across the country protested against current economic hardship and multi-billion dollar corruption scandal in oil company Petrobras.

• Further protests are expected in capital Brasilia and across country and numbers of participants might increase close to a million.
• To add to the woe country's central bank increased interest rate by 100 basis points this year pushing the rates to a six year high at 12.75%. Central bank is trying to curb inflation and falling real that hits 12 year low against dollar.
• Despite of falling oil prices, Brazil's current account deficit is reaching to records.

Governments introduced reforms that resulted in budget surplus last year in more than a decade. On back of that government introduced further cuts on benefits and introduced higher taxes to balance the budget. However protests complicate the path ahead.

• Last month truck drivers across the country in a protest blocked the roads across country that resulted in a supply shortages in super markets over higher taxes on Fuel.
• Government finally was forced to give in to most of their demands.

Current number of protesters are still in small numbers compared to 2013's protest by at least a million people. However further protests and increased participation are expected in coming months.

Impact -

Increasing protests might have multiple effects over the country's political, economic and financial health.

• It might at extensive case lead to political crisis, though as of now any step down is unlikely.
• Derail the reform policies further that might lead to continued degradation of fiscal balance and current account.
• Real to suffer more against the dollar as uncertainty persists. Real is currently trading at 3.25, down 27% YTD against dollar.