Sentiment towards Brazil is fragile. Uncertainties surrounding the extent of the impairment to Petrobras, the state-owned oil company, have been partially allayed by the publication of the company's audited 2014 financial statement in April. While the results were not pretty - a BRL 44.6bn impairment charge plus BRL 6.2bn in corruption-related losses - the release of the long-awaited financials at least heads off fears of a technical default had the end-April reporting deadline been missed.



However, the real impact on the economy will likely be longer-lasting and probably enough to keep Brazil in recession this year (in 2015, growth of -0.8% is expected), according to Standard Chartered. As Petrobras is Brazil's largest company, accounting for 10% of Brazilian investment, cutbacks in planned capital investment (by as much as a third in 2015) will likely leave an already investment-starved economy struggling to grow in 2015. The retrenchment in spending plans also has significant impact on a broad range of contractors and supply-chain businesses that rely on Petrobras' investment.



Bankruptcies and job losses are mounting. The April employment report showed a net loss of almost 98,000 formal jobs, taking the year-to-date total to more than 160,000 net jobs lost. April's losses were not all concentrated in construction, manufacturing and oil-related sectors, either. Retail and services employment, previously better supported sectors of the economy, also showed signs of contraction, indicative of the broadening reach of Brazil's adjustment cycle.