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Latin America's biggest economy is shrinking

Latin America's biggest economy is shrinking

Posted by PanamericanWorld on December 02, 2015

Latin America's largest economy has shrunk even more than expected, increasing fears about the well-being of a nation hammered by falling commodity prices and a massive corruption scandal.

Gross domestic product fell by 4.5 percent in the third quarter compared with the same time frame last year, the country's statistics bureau reported on Tuesday.

The cumulative drop of 3.2 percent for the year so far is the worst since 1996, according to the Brazilian Institute of Geography and Statistics as the worst since 1996.

"The result is that Brazil's economy has now contracted for three straight quarters and is more than 5 percent smaller than it was at the start of 2014," said Neil Sharing, an economist at Capital Economics, a London-based firm. "There is a reasonable case to be made that Brazil is now enduring its worst recession since 1930-32."

A global plunge in commodity prices continues to hurt Brazil, with the agriculture sector generating 2.4 percent less income than in the previous three months. A corruption scandal involving politicians and the state-run oil company has ensnared the biggest names in construction in the country and therefore halted many projects. A collapse in domestic demand has also translated to a sharp slowdown in manufacturing activity.

The prospects are not encouraging. With rising inflation and unemployment, and high interest rates, consumer confidence is down. Families cut spending by 4.5 percent compared to the same quarter last year. Investment and exports also fell.

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