Brazil's World Cup Loss May Yet Be Dilma's Gain

Brazil’s battered psyche was evident in scenes of crying fans and players after the country’s worst World Cup defeat. Some in the stands vented their frustration by cursing President Dilma Rousseff, whose government footed a good chunk of the tournament’s $11 billion cost. Rousseff, who’s seeking a second term in October, can at least boast that the event came off without a hitch, contrary to what many expected. “People will be in a bad mood for a few days, but the Cup won’t decide the elections,” says João Augusto de Castro Neves, an analyst with Eurasia Group, a political consulting firm that gives Rousseff a 70 percent chance of winning.

The big challenge for Rousseff will be mending the world’s seventh-largest economy, which is growing at the slowest rate under any president in more than two decades. That’s in part a result of investors’ distaste for her administration’s policies. Business confidence has fallen to the lowest level in more than a decade. And among the seven largest Latin American economies, Brazil ranks last in fixed investment, at about 18 percent of gross domestic product. Growth forecasts for 2014 have been cut in half from the start of the year, to just over 1 percent. “Brazil is flirting with recession,” says Nicholas Spiro, managing director at Spiro Sovereign Strategy, a London-based investment consulting firm, and without political consensus about policy it “will bump along the bottom for a long time.”