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Country Insights

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The industry’s poor performance and hope in consumption
BRAZIL ECONOMICS - Report 16 Sep 2019
The outlook for GDP growth is disheartening. Despite the surprisingly good performance of industrial GDP in the second quarter, when it grew by 0.7% in relation to the first quarter, there are no signs that this was trend change. The monthly survey of industrial production conducted by the IBGE s...

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A shot of realism
BRAZIL ECONOMICS - Forecast 09 Sep 2019
Until recently, many observers believed that with the approval of the pension reform, the real would appreciate and GDP growth would accelerate. However, there has been a wave of downward revisions of the growth projections for 2020 (for 2019 the consensus remains around 0.8%), and instead of str...

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Current account and portfolio investment trends: an Alert
BRAZIL ECONOMICS - Report 09 Sep 2019
In this strange cycle through which the Brazilian economy is going through, manufacturing is one of the segments that is suffering the most (the other being civil construction). Although its performance was one of the positive highlights in the GDP figures for the second quarter, when manufacturi...

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Synthesis of the Brazilian Economy
BRAZIL ECONOMICS - Report 02 Sep 2019
The “Bolsonaro style” of governing has been clearly revealed to the world by the fires that are multiplying in the Amazon: he started by confronting and accusing his critics of responsibility, but when faced by threats of commercial retaliation he did what he should have done from the outset, ord...

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GDP in the Second Quarter of 2019
BRAZIL ECONOMICS - Report 02 Sep 2019
GDP grew by 0.4% (annualized rate of 1.8%) in the second quarter, reversing the contraction of 0.1% in the first quarter. The rise was higher than indicated by the behavior of the IBC-Br, and greater than the median projections reported by Bloomberg. The intensity and composition of this growth d...

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Volatility of the real, interventions and capital flows
BRAZIL ECONOMICS - Report 30 Aug 2019
This Report has two objectives. The first is to present clear evidence that the behavior of the real is very volatile, justifying the Central Bank’s interventions trying to smooth out the exchange rate fluctuations. The theme of these interventions – and the recent change of the intervention inst...

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Interventions in the foreign exchange market
BRAZIL ECONOMICS - Report 26 Aug 2019 2 responses
The Central Bank can intervene in the foreign exchange market by either buying and selling dollars in the spot market or through currency swap transactions. In all cases, these interventions have the aim of reducing the volatility of the real, not actions that prevent the exchange rate from chang...

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Deterioration of the external scenario
BRAZIL ECONOMICS - Report 19 Aug 2019
​The indications have increased that the projection for growth of 0.8% in 2019 is optimistic. One of the reasons is the worse external situation. The trade tensions between China and the United States have created a climate of uncertainty harmful to global trade and investment; Germany’s GDP rece...

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The dire fiscal problem of the states
BRAZIL ECONOMICS - Report 16 Aug 2019
The pension reform has raised the minimum retirement age for all categories of employees, however kept privileges for police personnel (including state police forces) and teachers. In this Report we show that many state governments have exceeded the limit of 60% of Net Current Revenue (NCR) for p...

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Interest rate – new cuts ahead
BRAZIL ECONOMICS - Report 12 Aug 2019
As the economy is stagnant and GDP operating below its potential (high unemployment and large industrial capacity slack), and inflation (current and expected) below the target, all the elements are in place for the Central Bank to cut the SELIC rate further. The most recent published indicators s...

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Synthesis of the Brazilian Economy
BRAZIL ECONOMICS - Report 05 Aug 2019
The political scenario continues to be guided by two basic forces: the abundant signs that President Bolsonaro is unprepared for office, and the reaction of the other branches of government and Brazilian society, trying to reduce the damages and make progress toward the reforms that are necessary...

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The labor market and the recovery pace
BRAZIL ECONOMICS - Report 05 Aug 2019
​The Central Bank resumed the monetary easing cycle, cutting the SELIC rate by 50 basis points, to 6.0%, at the last COPOM meeting. The Bank’s projection model indicates that the SELIC will be reduced at least once more by 50 points, and we expect further cuts bringing the SELIC rate to 5% at the...

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What to expect from credit expansion?
BRAZIL ECONOMICS - Report 29 Jul 2019
As the economy is virtually stagnant and inflation (current and expected) is significantly below the target, this week the Central Bank will start a new monetary easing cycle. Credit is an important channel for transmission of monetary policy, and it has been showing some growth, which together w...

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What’s on the government’s agenda after the Pension Reform?
BRAZIL ECONOMICS - Report 22 Jul 2019
During the first half of the year, all the government’s legislative efforts were focused on the pension reform. The 379 favorable votes in the first floor vote in the Chamber of Deputies did not end the process, but it does mean that a gigantic step has been taken toward final approval. So, what ...

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The time has come to start lowering the interest rate
BRAZIL ECONOMICS - Report 15 Jul 2019 1 response
Ambitious objectives are rarely entirely achieved, but in the case of the pension reform, the most recent legislative developments indicate that the country is poised to take an important step ahead. Many actions in the fiscal field will still be necessary to reverse the rising path of the debt/G...