从结构看，财政的死板使得政府操作空间非常小，可自由支配的个人开支仅占10%，包括公共投资，最近几个月已经大幅削减。其次，相对较高的强制性贡献比例相比新兴国家平均水平，将进一步减少“容忍额外的税收”。从周期角度来看，经济衰退，强调财政紧缩，引发了赋税收益大规模减少。最后，Rousseff在2014年10月以微弱优势当选，基于非常强劲的社会福利平台。政策转变由事件支配，同样在国会中会产生对抗。面对过往痛苦改革的困难，公共账户持续恶化，随后惠誉在2015年12月巴西主权评级降级至投机级别，Joaquim Levy引咎辞职。他由Nelson Barbosa代替，前计划部长以及总统的亲密伙伴。人们有理由担心财政控制将放宽，因为看到巴西失去了神圣的“投资级别”地位，这是国际投资者压力的一种释放：这是一个天赐良机，而不是发出实施刺激政策并尝试放宽货币政策的警告信号。
After a nightmarish 2015, the year 2016 looks no better. A festering political and institutional crisis may still weigh on the confidence of economic agents, a vital ingredient for a hypothetical economic recovery in the midst of a tough international environment. The key figure is 10% （the French name of the “Downfall” game is “10 de chute”）, which reflects the level of the President’s popularity rating, the inflation rate, the public deficit, the rise in public debt over the past year, and soon, the jobless rate, not to overlook the decline in industry since 2013 and the expected cumulative decline in real GDP. Following the failure of its rentier economy and demand-side stimulus policies, the path to salvation lies in openness to trade and a supply-side shock.
More than a year after the outbreak of Petrol?o, Brazil's mega- corruption scandal, ongoing legal investigations and criminal charges continue to send shock waves through Brazil's political and economic establishment. Suspected in the scandal, Eduardo Cunha, lower house speaker and member of the centrist PMDB party, part of the ruling coalition, accepted a request to launch impeachment proceedings against President Dilma Rousseff on 2 December for the falsification of public accounts to minimise the size of the fiscal deficit. Until the new parliamentary session opens in early February, it is impossible to say whether the proceedings will go forward. In any case, President Rousseff's resignation no longer seems to be on the agenda, despite a popularity rating holding stubbornly at 10%.
Once again, we have lowered our GDP growth estimates for 2015- 2017. We are now looking for a cumulative decline in real GDP of about 10% between mid-2014 and early 2017. An extremely deteriorated and uncertain political climate will continue to undermine the confidence of investors and households alike in the quarters ahead. In the short term, we do not foresee a recovery for several reasons: declining real wages （-3.5% y/y in the first 11 months of 2015）, soaring unemployment （estimated at 10% in 2016, vs. 5% in 2014）, the probable contraction in bank lending in the months ahead and the already sharp rise in lending rates （+700bp in a year）. Nor can the Brazilian economy count on support from the international environment, characterised by China’s slowdown, advanced economies’ agonisingly slow recovery and rock-bottom commodity prices. Real GDP contracted another 1.7% q/q in Q3 on a seasonally-adjusted basis, the 7th consecutive decline （with the exception of a 0.1% increase in Q4 2014）. In the first 9 months of 2015, GDP was down 3.2% compared to the same period in 2014. Investment （19% of real GDP） plunged 12.7% y/y in the first 9 months of the year, while household consumption （67% of real GDP） was down 3%.
In the midst of recession and a sharp depreciation in the real （-33% against the dollar in 2015）, we are bound to see further adjustments in the external accounts. With rapid improvements in the trade balance and the resilience of foreign direct investment （FDI）, the country should manage to preserve its solid external solvency and liquidity position in 2016-2017. Consequently, we see no real need to worry about the risks of a balance of payments crisis or destabilisation of the banking system, which seems to be solid, despite the expected deterioration in asset quality, which was already observed in 2015. What is alarming, however, is the vertiginous downturn in public finances.
Public finances spin out of control
The central bank is determined to tighten monetary policy further to combat inflation, which rose to a 13-year high of 10.7% in 2015 （vs. an inflation target of 4.5% +/- 2 percentage points）, driven up by the real’s depreciation. Yet it must weigh its efforts against the rapid increase in the interest burden on the public debt （+3.2 points of GDP in January-November 2015 compared to the year-earlier period, to 8.3% of GDP）, 93% of which is denominated in the local currency. Since early 2015, the yield on 4-year bonds has gained 350 bp to 16.3%, and the 10-year yield spread on sovereign bonds in foreign currencies and those of 5-year CDS have more than doubled （to 510 bp and 480 bp, respectively）.
Fiscal dominance, a theme dear to Olivier Blanchard, former IMF chief economist （NBER Working Paper 10389, March 2004）, is once again the centre of debate in Brazil. Raising real interest rates to support the exchange rate would end up having the opposite effect, and would also drive up inflation: an interest rate increase would increase the probability of default on domestic public debt and fuel growing risk aversion among investors. In conclusion, monetary policy is seen as counterproductive, and fiscal policy would be the only effective instrument for reducing inflation.
Fiscal dominance or not, Finance Minister Joaquim Levy's programme to clean up public finances launched by just over year ago has been a failure. The primary deficit of the consolidated public sector was 0.7% of GDP in the first 11 months of 2015, and the overall deficit has climbed to 9% of GDP. Taking into account the BRL 57 bn （2% of GDP） spent in December to repay pedaladas （spending allocated to the balance sheets of public banks in infraction of fiscal rule） reintegrated in the Federal government accounts, the overall deficit is expected to have exceeded 10% of GDP in 2015, and still in 2016. The direct consequence is the alarming increase in the gross public debt, which swelled by at least 8 points of GDP in 2015 （higher debt stock and drop-off in nominal GDP） and by an estimated 13 points of GDP in 2016-2017, to 80% in two years.
From a structural perspective, fiscal rigidity leaves the government very little manoeuvring room, with discretionary spending accounting for only about 10%, including public investment, which has already been slashed in recent months. Second, the comparatively high weighting of mandatory contributions （35% of GDP） relative to the average for the emerging countries further reduces the “tolerance for additional taxes”. From a cyclical perspective, the economic slump, accentuated by fiscal tightening, has triggered a major loss of tax revenue. Lastly, Dilma Rousseff was re-elected by a narrow margin in October 2014 based on a rather strong social welfare platform. The political shift dictated by events has also run up against hostility from Congress. Faced with the difficulty of passing painful reforms, the ongoing deterioration in the public accounts and the subsequent downgrade of Brazil’s sovereign rating to speculative grade by Fitch in December 2015 （after Standard & Poor’s downgrade in September）, Joaquim Levy resigned. He was replaced by Nelson Barbosa, former minister of planning and a close associate of the president. There is reason to fear that the fiscal reins will be loosened, since some see the loss of Brazil's sacrosanct "investment grade" status as a kind of liberation from the pressures of international investors: a godsend rather than a signal of alarm for launching a stimulus programme （subsidies, support for the construction sector, reactivation of lending via public banks?） and for trying to loosen monetary policy.
Exiting a rentier economy via a supply-side shock
The expansionist policy to support demand （2011-2014） was guided by an erroneous economic analysis and political dogma. Although a cyclical rebound must inevitably include ongoing fiscal efforts and a political clean up capable of regaining the confidence of economic agents, structural reforms designed to boost the supply side are also imperative to consolidate economic growth in the medium term.
Initiated in the 1930s, Brazil's industrial take-off was sustained in the 1950s through an import substitution strategy. But the Custo Brasil - the high cost of conducting business in Brazil - ended up draining the industrial sector's competitiveness: manufacturing output has dropped by nearly 10% since 2013, falling back to the 2005 level despite major adjustments to the exchange rate. According to the OECD （Brazil Economic Survey, November 2015）, per capita productivity in the manufacturing sector has stagnated over the past decade （it has increased slightly after adjusting for the number of hours worked）. In 2012, it was five times less than the average for a selection of 41 emerging and developed countries. At the same time, unit labour costs more than doubled. Brazilian industry now generates only 26% of value added, compared to an average of 36% in middle-income countries. Brazil's economic structure is typical of a high-income country, with services generating more than 70% of value added.
All in all, despite the commodities windfall of the 2000s, Brazil is still not very open to trade. Dutch disease is no longer a problem and the country's economic future now depends on an industrial strategy and greater openness. The regulatory framework must be simplified or overhauled （labour laws, the tax system, stronger contract law and judiciary system）. Trade protections and entrance barriers hampering competition must be eased or eliminated （few free trade agreements; taxes on intermediate goods imports that hurt competitiveness; monopoly or oligopoly rent）. Lastly, the country must deal with the unending problems of poor infrastructure, education/training and innovation, which must be placed at the heart of an ambitious industrial policy and investment programme.