SAO PAULO, (Reuters) – Brazil fell into a recession in the first half of the year as investment dropped sharply and the country’s hosting of the World Cup suffocated economic activity, a major blow to President Dilma Rousseff’s already fading hopes for re-election in October.
Latin America’s largest economy has suffered stagnant growth for more than three years under the economic policies of the left-leaning Rousseff, which have dented consumer and business confidence and caused heavy losses for financial investors.
The economy took an even bigger downturn in the second quarter, with gross domestic product contracting 0.6 percent from the first quarter, government statistics agency IBGE said on Friday. It also revised lower its estimate for first-quarter activity to a 0.2 percent contraction, meaning the economy entered a recession.
The data that confirmed the recession, Brazil’s first since the global financial crisis of 2008-09, gives a powerful weapon to Rousseff’s opponents in the Oct. 5 election at precisely the moment that her candidacy is at its most vulnerable.
Polls over the last week have shown Rousseff falling behind centrist candidate Marina Silva in the event of a second-round runoff, which appears likely.
Silva and the other main opposition candidate, Senator Aecio Neves, have strongly criticized Rousseff for being weak on inflation and ruining the economic momentum that made Brazil a Wall Street darling last decade.
“Today is a sad day for Brazil,” Neves told reporters. “The truth is that this government failed, and it failed principally in its steering of Brazil’s economy.”
Brazil’s economy grew an average 4 percent under Rousseff’s predecessor, Luiz Inacio Lula da Silva, from 2003 to 2010. Growth under Rousseff’s watch is set to average less than 2 percent.
Brazil’s stock market rose as investors focused less on the bad economic report and more on the increasing possibility that Rousseff might not be re-elected. One equities investor on Wall Street e-mailed simply: “Hallelujah.”
In comments to reporters in the northeastern state of Bahia Friday, Rousseff promised that economic performance during the second half of the year would be “better.” The comments were broadcast via social media by Rousseff’s campaign.
