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COUNTRY INSIGHTS

The Return of Growth, But Slow
BRAZIL ECONOMICS · Report · 21 Aug 2017

The economic activity numbers for June drastically reduce the possibility of contraction of GDP in the second quarter. The shining light was the performance of retail sales, leading to an estimate of strong growth of household consumption in the three months through June. Thus, although doubts pe...

Falling Inflation and Continuation of Monetary Easing
BRAZIL ECONOMICS · Report · 14 Aug 2017

The increase of 0.24% in the June IPCA exceeded the market consensus by 6 basis points, but the rise was all explained by the change in the electricity rate flag (from green to yellow) and the increase in the tax on fuels. All the same, inflation over the previous 12 months through August was onl...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 07 Aug 2017

The Chamber of Deputies preferred to ignore the robust evidence and refused to allow the Supreme Court to judge the denunciation of receiving bribes lodged against President Temer by the Chief Prosecutor’s Office. It was a personal victory for Temer, but the fragmentation of the allied base, with...

Industrial Production in the First Semester
BRAZIL ECONOMICS · Report · 07 Aug 2017

After a long and intense decline, industrial output grew in the first half of 2017, marking the first episode since 2013 of two straight quarters of expansion. This is a clear sign of the start of overall GDP growth recovery, but the increase in production was not generalized, but rather concentr...

Monetary Policy
BRAZIL ECONOMICS · Report · 31 Jul 2017

Last week the Central Bank cut the interest rate by 1 percentage point, to 9.25%. Its communiqué made it clear that there is still room for a significant further reduction of the SELIC rate, without jeopardizing the inflation target for 2018. Our projection is that the interest rate will fall to ...

We Forecast the SELIC Rate at the End of the Year will be 7.5%
BRAZIL ECONOMICS · Report · 24 Jul 2017

We have altered our projection for the SELIC rate at the end of 2017 to 7.5% a year, for three reasons. First, although the economy is on the verge of recovery, all indications are that it will be very slow, keeping the GDP gap negative for a good while longer. Second, mainly due to a highly favo...

Reiteration of the Commitment to the Fiscal Target
BRAZIL ECONOMICS · Report · 24 Jul 2017

Despite the continuing signs of the government’s political weakness and pressures for more spending that boosts congressional support for the president, the economic team reacted by sending encouraging signals about their commitment to the fiscal target. The announcement of an additional budget c...

Economic Activity, Interest Rates and Consumption
BRAZIL ECONOMICS · Report · 17 Jul 2017

Despite divergences between some indicators, the overall signs are that the contraction of economic activity is nearing its end. However, the recovery will likely be very slow. Although the real interest rate for one year (the yield on 360-day swaps deflated by expected inflation one year ahead) ...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 11 Jul 2017

The country’s political scenario is still uncertain and filled with risks. Targeted by a denunciation of passive corruption and politically mutilated by the devastating conversation with Joesley Batista, President Temer has channeled all his efforts into producing a legal defense that can convinc...

An Intense Monetary Easing Will Continue
BRAZIL ECONOMICS · Report · 10 Jul 2017

With the start of the political crisis, it soon became apparent that from the standpoint of inflation two forces acting in opposite directions had been generated. By retarding resumption of growth, the crisis would accentuate disinflation, but by raising the risks and thus discouraging the capita...

Effects of the Favorable External Impulse
BRAZIL ECONOMICS · Report · 03 Jul 2017

In the midst of a political crisis that increases risks and hampers growth recovery, Brazil is benefiting from two favorable movements of the international economy. The resumption of growth in Europe, Japan and the United States in an environment of abundant international liquidity has reduced...

Encouraging Signs for Consumption Coming From the Credit Market
BRAZIL ECONOMICS · Report · 03 Jul 2017

​It is very clear that on the aggregate demand side, recovery of household consumption will predominate over recovery of investments, which are still falling. An indication comes from the credit data. Unlike what has been happening with credit to businesses, which continues to contract along with...

The Interest Rate Cut at the Next COPOM Meeting
BRAZIL ECONOMICS · Report · 26 Jun 2017

Although the political crisis has generated uncertainty about asset prices, particularly the exchange rate, two strongly disinflationary forces still predominate: the negative GDP gap and the solid anchoring of expectations. In the last Inflation Report, the Central Bank recognized these points a...

The Political Crisis and the Worsening of the Economic Scenario
BRAZIL ECONOMICS · Forecast · 19 Jun 2017

From a purely economic standpoint and a strictly short-term scenario, the current crisis is not as severe as many of the previous ones, but in the political realm the story is very different. Governability has eroded, making it virtually impossible to win approval of a reasonable version of the p...

The Signs of Economic Activity
BRAZIL ECONOMICS · Report · 19 Jun 2017

Last week was filled with positive data on April’s economic activity, suggesting the recovery recorded in the first quarter might extend to the second. Along with the continuing fall of the interest rate, other forces are also acting in the direction of economic recovery, but even though the wors...

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