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COUNTRY INSIGHTS

Countercyclical Measures?
BRAZIL ECONOMICS · Report · 21 Mar 2016

In an extreme gesture, aiming to muffle the political crisis, Dilma Rousseff decided to appoint Lula to be her new chief of staff. It was an act of desperation with very low chances of succeeding. So far he has been barred from assuming the position by injunctions. Last week the great majority of...

The Chances of Impeachment Have Increased
BRAZIL ECONOMICS · Report · 14 Mar 2016

Executive Summary In recent days the real has appreciated, the CDS quotations have fallen, stock prices have risen and longer term interest rates have declined. These were not movements prompted by signs the Rousseff administration was “coming to its senses”, changing its economic policy bearing...

Household Consumption Continues to Fall
BRAZIL ECONOMICS · Report · 14 Mar 2016

In November last year there was some optimism about possible recovery of real retail sales, but it soon became evident that the growth that month came from the Black Friday promotions, repeating the same behavior that had occurred in November 2014. However, the optimism was not easily abandoned, ...

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

The recession worsened in 2015 and still has a long way to go. It is the result of ill-conceived decisions by the Rousseff administration, made worse by the government’s failure to react, because of the main objective of staying in power in the short run. The country’s political cauldron has been...

The Indications from the Latest GDP Data
BRAZIL ECONOMICS · Report · 07 Mar 2016

To understand what lies ahead, we need reliable information about what has happened. The announcement that GDP in the fourth quarter of 2015 fell by 1.4% in relation to the third (an annualized rate of 5.7%) reveals that the economy contracted by 3.8% last year. This also means seven consecutive ...

Forces Behind the Depreciation of the Real
BRAZIL ECONOMICS · Report · 29 Feb 2016

Executive Summary: It is very hard to gauge the tendency of the exchange rate, but the task is easier when the economy is plagued by large risks. In the Brazilian case a close correlation exists between the exchange rate and two risk measures: the CDS quotations and the EMBI-Brazil. In the pas...

Credit Contraction and Firms’ Health
BRAZIL ECONOMICS · Report · 29 Feb 2016

Fixed capital investments have been falling since the third quarter of 2013, and the steep downward path of demand gives no hope of recovery. The contraction of credit to companies, both for expansion and working capital, is acting in the same direction.

Deep Recession and Risk of Solvency of the Public Debt
BRAZIL ECONOMICS · Forecast · 22 Feb 2016

Brazil is suffering its worst recession in the past 35 years. GDP in 2015 fell by about 4%, and will probably contract by 4.2% in 2016. Investments next year will also fall 10%, along with further contraction of household consumption, by around 3%. The average unemployment rate in 2016 should be ...

The Fiscal Crisis and a New Downgrade
BRAZIL ECONOMICS · Report · 22 Feb 2016

Standard & Poor’s lowered Brazil’s credit rating again, now to “BB”, two steps below investment grade, with a negative outlook. The announcement had virtually no effect on the markets: Brazil’s 10-year CDS quotation dipped 20 basis points and the real appreciated slightly. This behavior is no sur...

The Resistence of Inflation
BRAZIL ECONOMICS · Report · 15 Feb 2016

The fate of those who make projections is that the target rarely stands still. At the start of 2015, the consensus was that inflation would remain high due to the coming adjustments of administered prices, which were repressed, after which it would start to decline. The projections at that moment...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 01 Feb 2016

The country continues to suffer the effects of the worst recession in the past 30 years. The impossibility of putting the economy on a growth path without adopting reforms that reduce the upward trend of government spending and interrupt the unsustainable rise of the public debt, combined with th...

Fiscal Policy: More Transparency, but the Situation is Difficult
BRAZIL ECONOMICS · Report · 01 Feb 2016

Last week the fiscal policy data for December were announced, incorporating the payment of the “budget rollovers” (pedaladas) from previous years. The good news is that 2016 is starting without the hangover of liabilities from past years. However, although the fiscal statistics are now more trans...

The New Finance Minister’s Task: Mission Impossible
BRAZIL ECONOMICS · Report · 26 Jan 2016

The new finance minister takes office with the simultaneous mission of pursuing the fiscal adjustment and stimulating the economy, pulling it from a long and deep recession. He is faced with a veritable mission impossible. Due to lack of conviction and political support, he’s unlikely to propose,...

Has the Economy Reached “Rock Bottom”?
BRAZIL ECONOMICS · Report · 21 Jan 2016

Prompted by reports in the specialized economics/business press, some clients have asked us if there are any signs that the cycle of contracting GDP is nearing its end. We show here that this is not what is shown by the various confidence indicators from FGV, or our leading indicator of GDP. T...

Economic Activity: More Black Clouds on the Horizon
BRAZIL ECONOMICS · Report · 18 Jan 2016

Each new round of data on economic activity has been bringing new negative surprises. The most recent results are no different, and now the signs are that GDP in 2015 contracted by 4%, with a high probability that this outcome will be repeated in 2016.

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