Goldman Sachs warns Brazil economy will worsen amid rising inflation, political corruption

As the world focuses on the weak United States economy, the collapsing Chinese economy and the tepid European economy, there is one area that investors should start honing in on: Brazil.

After a wave of economic growth, Brazil is on the cusp of entering a session, which could then be expanded into a depression (SEE: Brazil economy could face deepest recession since 1901). This is beginning to show in global markets as the real has experienced the biggest dip against other currencies over the past 12 months.

A new report from Goldman Sachs says the Brazilian crisis is going to get much worse over the next little while. Thanks to its easy money policies (SEE: Brazil’s Easy-Money Problem), the Latin American country is heading towards the largest depression in more than a century, with rising inflation and political corruption.

“Brazil is a mess,” said Alberto Ramos, the chief Latin America economist at Goldman Sachs, in a speech organized by the Brazilian-American Chamber of Commerce in New York on Wednesday. “Number 10 used to mean Pele. Now it’s inflation rate, unemployment rate and the popularity rate of the president.”

Even its credit rating is being slashed as it was downgraded to junk status recently.

In addition to a financial crash, there is a political corruption scandal brewing in Rio de Janeiro.

Here is what Bloomberg News writes:

“The probe put the spotlight back on the Workers’ Party at a time when Rousseff is trying to regain political momentum amid a pending impeachment process. The target of the investigation is whether construction company OAS SA and the bankers’ housing cooperative Bancoop used real-estate properties to launder money received from kickbacks, said Federal Prosecutor Carlos Santos de Lima. As part of the probe, police are checking whether former President Luiz Inacio Lula da Silva owned one of the properties, an apartment in the Guaruja beach complex.”

This is contributing to the weakening economy. Since no one knows who’s going to jail today and what government is going to be in place tomorrow, businesses are unsure what steps to take.