The reason: its worst economic depression in decades.
Cities that are home to millions of Brazilians like Campinas, Macapá, Lavras do Sul, and Porto Ferreiro have announced they will not devote funds this year to celebrate the event which usually takes place between February and March.
The authorities claim that a drop in fiscal revenues and a shortage of federal funding have forced them to call off the official celebration of Brazil’s most important holiday.
Those most affected by the measure are commerce and the entertainment industry, with potential spillovers in tourism, as visitors decide to go elsewhere to celebrate carnival.
2015 was a tumultuous year in Brazil. The Dilma Rousseff administration scrambled to deal with corruption scandals, mounting unemployment, and historic inflation.
The Brazilian government missed its inflation target of 6.5 percent, the annualized rate reaching 10.7 percent, the highest since 2002.
A Depressing Future
This year doesn’t seem to hold anything better for Brazil. On Monday, January 11, the Central Bank presented forecasts produced by more than 100 financial institutions, which predict a 3-percent drop in GDP in 2016.
Industrial output will fall by 3.45 percent in 2015 and will only recover some growth in 2017, according to the projections. Pessimism also drives the poor economic performance, as evidenced in the Consumer Confidence Index released by the Getúlio Vargas Foundation in December 2015.
“Consumers have downgraded their current evaluations and their expectations for the following months. The Present Situation Index fell to 4 percent, the lowest ever recorded,” the foundation explained.
The index measuring satisfaction with the family’s financial situation also dropped to its historic low, following an eight-month decline.
This study mirrors a trend revealed by the Central Bank on January 7: the amount of money withdrawn from savings accounts surpassed deposits in 2015, a negative balance of B$53.56 billion (US$13.39 billion), the lowest since 1995.
The capital flight out of banks was due to the raising of interest rates to curb inflation, which made saving money less attractive, the central bank said.
Government Didn’t See It Coming
President Dilma Rousseff acknowledged she did not foresee the recession. “Not perceiving the extent of the crisis” was her administration’s biggest mistake, she said on January 7.
The president argued that she failed to predict the size of the economic downturn due to “domestic and foreign problems.” She cited China’s instability and the fact that Brazil is going through one of the worst droughts in several decades as contributing factors.
As for 2016, Rousseff told journalists that her administration’s priority will be to balance the budget, promising to “do everything possible” to guarantee a 0.5 percent primary surplus and bring inflation back to 6.5 percent a year.
But the economy is hardly the only problem Rousseff must tackle. Her governing coalition is mired in accusations of embezzlement and bribery at the state-owned firm Petrobras, and she is facing impeachment proceedings in Congress.