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The Primary Fiscal Target for 2017: A Step Ahead
BRAZIL ECONOMICS · Report · 11 Jul 2016

The announcement of the primary deficit target of R$ 139 billion for next year brought more criticism than praise. After all, even if it is accomplished, the primary deficit will still be very high (2% of GDP), frustrating the expectations of all those who would like to see stronger action by the...

The Fiscal Adjustment, End of the Recession and Easing of Inflation
BRAZIL ECONOMICS · Forecast · 05 Jul 2016

Although the progress of the fiscal adjustment is subject to uncertainties, both because the necessary measures are unpopular and because it is not possible to ignore the political effects of the Lava-Jato investigation, we assume that the government will manage to obtain congressional approval o...

Giving With One Hand, Taking With the Other
BRAZIL ECONOMICS · Report · 04 Jul 2016

The economic team led by Meirelles inherited a grave fiscal situation, with an explosive public debt trajectory that cannot be fixed in the short run, even with approval of bold measures, such as the proposed constitutional amendment (PEC) that would cap real growth of expenditures. Despite the n...

What Will be the Course of Monetary Policy?
BRAZIL ECONOMICS · Report · 27 Jun 2016

When on Tuesday (June 28th) the Central Bank releases the Inflation Report for the second quarter, Ilan Goldfajn has a good opportunity to analyze both the legacies received and the course corrections he intends to impose on monetary policy. The first legacy comes from the extremely expansionary ...

The Fiscal Adjustment Battle: First Moves
BRAZIL ECONOMICS · Report · 20 Jun 2016

The government took an excellent first step toward the fiscal adjustment by sending to Congress a proposed constitutional amendment (PEC) establishing a cap on growth of the central government’s primary expenditures. But this is just the start of a long and arduous adjustment that will have to ex...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 14 Jun 2016

The first month of the interim government of Michel Temer was marked by important victories, the most evident being the assembly of the economic team. The quality of the new team is unquestionable and extremely welcome. It includes people like Henrique Meirelles as finance minister, Ilan Goldfajn...

The First Steps of the Adjustment
BRAZIL ECONOMICS · Report · 13 Jun 2016

To achieve renewed growth while keeping inflation under control, Brazil needs various reforms, but by far the most important is in the fiscal area, to produce a return of primary surpluses large enough to lower the debt/GDP ratio. To start this adjustment, the government has chosen to avoid an im...

The Recent Inflation Trend
BRAZIL ECONOMICS · Report · 13 Jun 2016

After a brief period of deceleration, the 12-month IPCA increased again in May. This does not represent a trend reversal, indicative of renewed inflationary pressures. The tendency is for inflation to continue waning. Nevertheless, the probability is very high that the 12-month IPCA will close th...

Might the Recession be Nearing its End?
BRAZIL ECONOMICS · Report · 06 Jun 2016

A few weeks ago we showed that our leading indicator already presages that GDP will stop falling in the third quarter this year. Last week the IBGE announced that GDP in the first quarter only declined by 0.3% – far less than the median of expectations. This was good news. However, when looking a...

The Start of the Temer Government: Where Will Growth Come From?
BRAZIL ECONOMICS · Report · 30 May 2016

It’s too early for a more precise assessment, but at first glance the measures announced by the new administration are in the right direction. They start by addressing the origin of the rapid growth of the debt/GDP ratio, which is the increase of expenditures at a pace faster than economic growth...

Forces Driving the Exchange Rate
BRAZIL ECONOMICS · Report · 23 May 2016

An increase in demand for Brazilian assets leads at the same time to a decline in the risk premiums (CDS quotations) and appreciation of the exchange rate. Both of these movements started occurring before the change of government, in light of the clear increase in the likelihood of impeachment, w...

What are the Signs of Economic Activity?
BRAZIL ECONOMICS · Report · 16 May 2016

With the release of the IBC-Br for March, we have virtually all the economic activity indicators for the first quarter of 2016, making it possible to estimate GDP in the first three months. The conclusion is that it contracted by roughly the same as in the last quarter of 2015. However, our leadi...

Risk Premiums and Exchange Rate at the Start of the Temer Administration
BRAZIL ECONOMICS · Report · 09 May 2016

As the start of the Temer government approaches, we want to answer two questions that are often raised: assuming the new government obtains sufficient political support to carry out the structural reforms necessary for the fiscal adjustment, can a sharp drop in the risk premiums be expected, hast...

The New Government and the Interest Rate Decline
BRAZIL ECONOMICS · Report · 09 May 2016

Backed by the changes in the economic policy field, the most important of which is the major shift in fiscal policy, the Central Bank under the coming Temer government will likely start an easing cycle. Although inflation is still very high, important forces are at work to reduce it, mainly: the ...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 05 May 2016

BUILDING A VIRTUOUS CIRCLE - The acceptance of the impeachment motion by the Chamber of Deputies by a comfortable majority sealed, from a political point of view, the end of the Rousseff administration. There are still legal steps to take place, as the ones running in the Senate, but de facto pol...