2015 was a year Brazil would like to forget. Its economy crashed, its political class was decapitated by a corruption scandal, a huge iron mine dumped toxic waste onto a bunch of villages — and the sludge is now seeping into the ocean. See In the Year’s Final Indignity, Slime Coats Brazil’s Pristine Beaches.
But the Brazilian development with the widest ramifications involves its sovereign wealth fund. This is an investment fund set up and run by the government and funded with the revenues from commodity sales, that was supposed to increase national wealth by buying things that would then rise in value. This too, has not gone as planned.
Brazil Dips Into Sovereign Wealth Fund as Finances Deteriorate
(Bloomberg) – Brazil dipped into its $620 million sovereign wealth fund on Tuesday as the government struggles to shore up public accounts that have been hit by the deepest economic recession in 25 years.
The government withdrew 855 million reals ($216 million) from the fund, or about one-third of its assets, as part of a strategy to boost public coffers, the Finance Ministry said in a statement Wednesday. The decision was made “in a context of economic contraction with a sharp drop in fiscal revenue and difficulties to cut mandatory expenses,” the statement read.
The move was expected after the fund earlier this year started unloading shares of state-owned Banco do Brasil SA, which account for most of its holdings. The fund raised 134 million reals by selling those shares in the first half of July.