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COUNTRY INSIGHTS

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...

The Labor Market Continues to Deteriorate
BRAZIL ECONOMICS · Report · 02 May 2016

The clearest reflection of the severe recession, which is far from over, is the worsening of the labor market. The consequences are a reduction in the level of employment and real wages, accentuating the contraction of household consumption and reducing tax receipts, making the fiscal adjustment ...

Change of Government and Resumption of Investments: What can be Expected?
BRAZIL ECONOMICS · Report · 25 Apr 2016

The probability is now higher that Brazil will soon have a new government, with sufficient support to make substantial changes in economic policy, enabling the start of a cycle of reforms. The appreciation of Brazilian assets is a first reaction in this direction, but it will take much longer for...

Brazil and the World According to the IMF
BRAZIL ECONOMICS · Report · 18 Apr 2016

Last week the International Monetary Fund (IMF) published its semiannual update of the World Economic Outlook (WEO). The report contains negative information about the Brazilian economy, and paints a global economic picture that will be unlikely to stimulate Brazilian growth.

Two Crises: Political and Fiscal
BRAZIL ECONOMICS · Report · 11 Apr 2016

In the midst of the worst recession in the past 35 years, caused by the current government’s mistakes, Brazil is facing two crises: a fiscal crisis, leading to explosive growth of the gross public sector debt in relation to GDP; and a political crisis that threatens the administration’s survival....

Alleviation of Inflation and Caution by the Central Bank
BRAZIL ECONOMICS · Report · 11 Apr 2016

The IPCA in March grew by 0.43%, bringing the figure over the preceding 12 months to 9.39%, the lowest since June last year. The deceleration was led by regulated prices, but was helped by less adjustment pressures in service prices. The country seems to have entered a period of declining inflati...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 07 Apr 2016

NIETHER DILMA NOR TEMER... – Dilma Rousseff’s reaction to avoid impeachment continues to ignore the costs her strategy will impose on the country, be they political, institutional or economic. If she wins her “holy war” against impeachment, the government will be even feebler than at the start of...

The Fiscal Crisis Gets Worse
BRAZIL ECONOMICS · Report · 04 Apr 2016

Anybody who has performed an exercise to size up Brazil’s fiscal imbalance will have reached the conclusion that a huge effort will be required, maintained for several years, to stanch the explosive growth of the public debt. In the 12 months through February 2016, the primary deficit reached R$1...

New Fiscal Measures: Another Step Backwards
BRAZIL ECONOMICS · Report · 28 Mar 2016

Last week Finance Minister Nelson Barbosa announced four proposals from the government in the fiscal policy field: renegotiation of the debts owed by the state governments; establishment of a primary spending limit; creation of a special spending contingency regime; and a change in the way the Ce...

The Labor Market Continues to Weaken
BRAZIL ECONOMICS · Report · 28 Mar 2016

The latest CAGED data reveal another increase in net layoffs. A natural reaction of many of these workers is to become self-employed (or start doing odd jobs). All the same, the unemployment rate is growing: from about 6.5% at the start of 2014 it is now approaching double digits.

Should Brazil Use its International Reserves?
BRAZIL ECONOMICS · Report · 21 Mar 2016

Frequent pressures have been exerted in the sense of “use the reserves to stimulate renewed economic growth”. The Central Bank knows the history of the many foreign exchange crises experienced by the country, all of them produced by economic policy mistakes, and certainly has developed institutio...

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