Roussef is probably nostalgic about her Marxist guerrilla fighter days right about now.

The seemingly inevitable just happened: after being hit hard by slumping global commodity prices, Brazil's sovereign debt has been downgraded back to below investment grade or junk status by Standard and Poor's. In 2008 Brazilian IOUs became investment grade; by 2015 it's yesterday once more. Add in the corruption case hounding the Rousseff leadership and all-around economic malaise to complete the rather dire picture. From building BRICs to stumbling blocks, it seems:

The Brazilian government’s sovereign debt rating has been cut to junk status by one of the major credit agencies, ratcheting up pressure on President Dilma Rousseff to find a way out of the country’s economic and political crisis. Standard & Poor’s said in a note on Wednesday night that Brazil’s hard-fought investment-grade status was gone and that its outlook on the country was negative, just as the nation entered recession and was expected to see an even worse 2016.

That means it will be far more expensive for the Brazilian government to tap international credit markets and that much investor money, such as mutual funds that only plough money into investment-grade nations, will automatically be yanked out of the country. S&P said that extreme political challenges for Rousseff “have continued to mount, weighing on the government’s ability” to shore up its finances as promised...

The downgrade, while widely expected, came earlier than many analysts forecast and arrives at a time of extreme volatility for the Brazilian economy, with inflation hovering around 10% and unemployment the highest it has been in decades. Additionally, Rousseff has almost no political backing, with her approval rating in single digits, the worst seen by any leader since the nation’s return to democracy three decades ago. S&P said that “the negative outlook reflects what we believe is a greater than one-in-three likelihood of a further downgrade due to a further deterioration of Brazil’s fiscal position”.

It now seems so long ago that Brazil had surmounted this seemingly regular lurch towards crisis. It was scheduled to host the World Cup and the Olympics to boot to show how times have changed. Apparently, many changes were just cosmetic. When the commodity surge receded, the same governance issues have reaffirmed themselves. How can it escape such a dire situation now? According to former Morgan Stanley man Stephen Jen, it's time for Brazil to turn back the clock in another way: take out an IMF bailout:

Stephen Jen has a proposal for Brazil to get out of the current economic mess: ask for a bailout from the International Monetary Fund. Not that Brazil needs the funding, said Jen, a former IMF economist. Latin America’s largest economy holds $371 billion in foreign reserves, almost 10 times the amount of the government’s foreign-currency debt.

But Brazil’s political system is in such disarray that the country can’t push through reforms needed to curb debt, tackle inflation and avoid more downgrades, according to Jen, the co-founder of London-based hedge fund SLJ Macro Partners LLP. Financial aid from the Washington-based IMF would require austerity measures such as tax increases and spending cuts, providing President Dilma Rousseff’s government with the political cover to implement unpopular measures needed to shore up the budget, he said.

“They cannot implement policies,” Jen said. “The whole system needs a cleanse. A quick way to bypass all these is to get the IMF. It’s a little wacky, but I think it makes so much sense.”

Strictly speaking, Brazil has built up substantial reserves over the years commodity prices were high, so there's little desperation for IMF loans. But, those reserves can go fast, and there is no guarantee for implementing political reform that the IMF would likely require for loan conditionalities.

First came the James Bond film Goldfinger, then came the spoof movie Goldmember. Now we have the threequel...Goldhater. It is generally well-known that India is a major if not the #1 market for the precious metal since many cultural traditions are based on it--especially as gifts. However, the substantial rise in gold prices in the past decade or so has served to increase India's current account deficit. How to control rises in the deficit, then? India has been busy slapping one tax on gold after another:

India will not revise its record high import duty on gold and other restrictions on imports until the nation's current account deficit is firmly under control, Finance Minister P Chidambaram said in Davos on 23 January. India has a record high 10% import duty on gold and a rule that says 20% of all bullion imports must exit the country as exports.

The subcontinent used to be the world's largest consumer of the precious metal until the government made three upward revisions to the import taxes on gold, to reign in a record current account deficit (CAD). The country's CAD could hover below the $50bn mark in the year to 31 March, 2014, a $20bn reduction from previous estimates.

In the longer term, officials indicate that changing consumption patterns of gold will be affected less by government fiat and more by cultural changes away from prioritizing exchanges of the precious metal. According to RBI Deputy Governor K C Chakrabarty::

Speaking at a panel discussion on Gold and its status in India - at IIMB, he said gold intoxication [don't you just love that term?] is prevalent only to India, and society as a whole must work together to change mindsets.

"Stop giving or taking gold as dowry and stop giving gold to temples," he advised. Maintaining that RBI has never stopped import of gold, he said: "Do not borrow money from banks to import gold." "Consumer has never benefitted from gold and gold has given a negative return world-wide, it is not an investment but a speculation," he added.

To be sure, the Congress Party has an eye on winning the next elections too, and all of these restrictions of gold imports may partly be responsible for its current unpopularity. Will Congress Party leaders loosen restrictions, then? They at least claim to be sticking to their guns:

Answering a query about an earlier media report that Sonia Gandhi, the leader of the ruling Congress party, had written to the Indian government asking for gold import restrictions to be relaxed, Chidambaram said he had not read the letter.

"Until we have a firm grip on the current account deficit I do not contemplate any roll back in any measure. We will have a full idea of the current account deficit only when the budget is presented and when the year comes to an end," Chidambaram told CNBC TV18 in Davos.

We'll see...

In competitive market economies, the battle for the commanding heights is conducted by corporations as well as countries. Now, Japan's massive trading houses that underpin the keiretsu system of business groups (Mitsui, Mitsubishi, etc.) have often been criticized as inefficient middlemen by Westerners who deal with them. However, the recent global financial crisis may have provoked a reassessment of their worth. Given the credit squeeze that resulted when trust became scarce in "arm's-length" financial markets, these trading houses kept the credit flowing given that they were more trust-based institutions. Count it as another demerit for neoliberal orthodoxy.

Another important function they are performing nowadays though is securing raw material availability for the manufacturing arms of their groups (alike Mitsubishi Steel, Motors, and what else have you). What, after all, would Japan Inc. be without such RM inputs to create world famous export-oriented outputs?

Although the heyday of Japanese industrial policy--Ministry of International Trade and Industry (MITI) coordination with keiretsu and all that--may have passed, there is still a lot of it being formulated. Witness for instance the current government initiative to capitalize on the mighty yen to secure natural resource supplies worldwide (presumably in the face of the Chinese attempting to do the same). Here we encounter a similar story, and who else is there to get the job than other than these trading houses? Once more onto the breach...

Japan's top trading house are likely to come head-to-head again while competing for copper mines across the globe, armed with an unprecedented ability to spend on what they see as a long-term bull market. The competition is likely to drive up asset prices for potentially lucrative properties holding the base metal, with the trading houses jostling for the prize of becoming the top supplier for the world's fifth biggest copper market and to tap surging demand in China and other emerging markets.

Japan's six big trading firms, which derive up to 80 percent of their profit from commodities, plan a combined 2.76 trillion yen ($36 billion) investment, a record high, in the year to March 2012 on the back of strong earnings growth in the past few years largely due to gains in oil and other commodity prices. About a half or a third of that amount will be reinvested in natural resources.

This great game between conglomerates' trading houses naturally spans the globe:

In the latest round of the battle for copper, Mitsubishi Corp and Mitsui & Co stood against each other in the high-profile face off between mining giants Anglo American and Codelco in Chile. Anglo shocked Chile's state copper giant last week when it announced it had sold a 24.5 percent stake in its southern Chilean copper properties to Japan's biggest trading house Mitsubishi for $5.4 billion.

The move signalled an aggressive stance in Anglo's negotiations with Codelco on the Chilean firm's option to buy 49 percent of the properties. Codelco has sued Anglo to prevent further sales and says it is still entitled to exercise that option, while Anglo says after the sale Codelco only has an option on 24.5 percent.

Mitsubishi paid a hefty $520 million, or 10 percent, premium to Codelco's valuation of the assets, Jiro Iokibe, analyst at Daiwa Securities Capital Markets Co, said. [OTOH] Codelco has secured a $6.75 billion bridging loan from Mitsubishi's rival Mitsui & Co to buy the assets, in which the Chilean company has given Mitsui an option to take the 24.5 percent stake which Mitsubishi has bought for $4.88 billion.

Certainly the omens are with even higher prices in the future due to good ol' supply and demand:

Japan's trading firms have been chasing copper assets as they see the prospect for rising demand and limited supply leading to higher prices for the industrial metal used in products ranging from cars to electric wiring. They expect demand in China, which accounts for 40 percent of global demand, to continue rising for at least the next five to six years while supplies remain tight due to a falling ore grade, analysts said.

"Demand will be particularly tight in the next two years as new mines will not come onstream until after 2014," Yasuhiro Narita, analyst at Nomura Securities, said. "Copper is one of their preferred assets, which has a large trading volume, meaning less volatility, and there is no concern of new substitutes emerging from technology development..."

While demand is rising, falling ore grade and increasingly difficult development conditions have boosted development costs. "Most mines currently being developed are located in inlands far from ports, causing development cost to balloon," said an official at the Agency for Natural Resources and Energy.

Japanese companies' copper development costs have risen to an average of $5,600 a tonne since 2008, up from the average of $2,500 during 1988 and 2005, according to government data. The official said the copper content of ore has now fallen to about 0.4 percent down from about 1 percent in 2000.

Very interesting stuff, and it's much like the current scramble for oil supplies--less accessible supplies become more economically viable as commodity price rises continue apace.