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COUNTRY INSIGHTS

Slower Growth
BRAZIL ECONOMICS · Report · 23 Oct 2023

Since peaking in April 2023, the IBC-Br has been decelerating, and in August it declined by 0.8% (Graph 1), confirming the information on the lower real retail sales, in both the restricted (0.2%) and augmented definitions (1.3%). In turn, services declined by 0.9%, while industry grew by 0.4%. A...

What do the Yield Curves Say?
BRAZIL ECONOMICS · Report · 16 Oct 2023

In the past four weeks, the nominal yield curve (based on the DI rate) has shifted steadily upward. That movement can be partly attributed to the continuous upward shift of the real yield curve, combined with the same upward movement of the implicit inflation rates. We attribute the rising real i...

Interest Rates in the United States and the Consequences in Brazil
BRAZIL ECONOMICS · Report · 10 Oct 2023

Against a backdrop of a still heated economy and tight labor market, the indication that the interest rate will remain “higher for longer” in the US does not exclude the possibility of further elevation. The resilience of the American economy to the Fed’s tighter monetary policy is a consequen...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 02 Oct 2023

Evidence is mounting that Brazil is facing a more severe fiscal problem than was assumed at the start of the year, due to the fragility of the fiscal framework as a brake on spending by the executive and legislative branches. The country seems fated to suffer from inefficient spending, with littl...

COPOM, Neutral Interest Rate and Potential GDP
BRAZIL ECONOMICS · Report · 25 Sep 2023

In the statement issued after the last COPOM meeting, the Central Bank pledged to maintain cuts of 50 basis points per meeting until the end of the year, with the SELIC rate reaching 11.75%. It also warned of the effects of the increase of the neutral interest rate in the United States on Brazil’...

Fiscal Expansion and the Monetary Policy Error of 2019
BRAZIL ECONOMICS · Report · 18 Sep 2023

With the unemployment rate below 8% and strong expansion of household consumption, Brazil’s economy can only be classified as heated. But in light of the looming difficulties of meeting the primary result target for 2024, the government wants to maintain GDP growth, with a corresponding increase ...

Fiscal Expansion and Its Consequences on Monetary Policy
BRAZIL ECONOMICS · Forecast · 11 Sep 2023

With the approval of the fiscal framework, the government will guarantee an increase in spending in real terms of 2.5% in 2024, and in an interval between 0.6% and 2.5% in 2025 and 2026. At the same time, primary result targets have been established of zero in 2024 and surpluses of 0.5% and 1.0% ...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 05 Sep 2023

The approval of the fiscal framework and the first round of the tax reform have left “debts” that have been negotiated in a type of arm-wrestling match between Lula and Lira, with results increasingly favorable to the latter’s objectives, as expected. The retribution for the approvals has entaile...

United States and China
BRAZIL ECONOMICS · Report · 28 Aug 2023

With the end of the pandemic, the Chinese and American economies are facing challenges. In the United States, the huge monetary and fiscal stimuli that boosted the economy have generated the highest inflation in the past 40 years, prompting the Federal Reserve to drastically tighten monetary poli...

The (Mis)trust in the Quality of the Fiscal Framework
BRAZIL ECONOMICS · Report · 21 Aug 2023

With the modifications made in the Senate, the text of the fiscal framework has returned to the Chamber of Deputies for approval, so the final wording is still unknown. Nevertheless, it is already known that the increase, in real terms, of primary spending (to occur in an interval between 0.6% an...

Despite Deceleration, GDP Will Grow by 2.3% in 2023
BRAZIL ECONOMICS · Report · 14 Aug 2023

After expanding by 1.9% in the first quarter, spurred by the 1.5 percentage point contribution of agriculture, GDP began decelerating in the second quarter. However, the result is better than expected, and reflects not only a still robust labor market, with growth of the occupied population in th...

The Start of the Monetary Easing Cycle
BRAZIL ECONOMICS · Report · 07 Aug 2023

Why did the COPOM decide to cut the SELIC rate by 0.5 percentage point, with five favorable votes against four votes for a decrease of only 0.25 p.p.? An initial interpretation is that the Central Bank yielded to political pressure from the government, which was indeed strong, and hence not only ...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 31 Jul 2023

More favorable international winds along with (preliminary) approval of the fiscal framework and tax reform package, the latter two developments prompting Fitch to raise Brazil’s credit rating to BB, have brought alleviation in the past few weeks. The end of the congressional recess in August por...

Execution Of The “Fiscal Framework”: The First Signs
BRAZIL ECONOMICS · Report · 24 Jul 2023

According to estimates by the National Treasury, to achieve the target of a null primary result in 2024, it will be necessary to obtain additional revenue of R$ 160 billion. The Treasury also estimates that even if this additional revenue is not attained, the gross debt will stabilize at 81% of G...

Global Inflation – A Complement
BRAZIL ECONOMICS · Report · 17 Jul 2023

In our last weekly report, “Global Inflation and Slower Growth: Consequences for Brazil”, we analyzed the reasons (fiscal and monetary) for the resilience of worldwide inflation. The objective of this report is to provide further information regarding the reactions in the monetary and fiscal fiel...

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