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COUNTRY INSIGHTS

The Current Account Deficit Has Climbed above 4% of GDP
BRAZIL ECONOMICS · Report · 22 Dec 2014

The current transactions account showed a deficit of US$ 9.3 billion in November, bringing the total deficit over the preceding 12 months to US$ 88.7 billion, or 4.1% of GDP, the largest proportional deficit since January 2002 (Graph 1). This large negative result reflects the current capital flo...

Recovery of Retail Sales: Will it Prove Sustainable?
BRAZIL ECONOMICS · Report · 15 Dec 2014

The good news is that real retail sales expanded substantially in October, both in the restricted sense (+1%) and augmented sense (+1.7%), which includes cars and construction materials. October was the third straight month of elevation. With this, it is likely that the third quarter this year wi...

COPOM Decision: Giving with one Hand and Taking Back with the other
BRAZIL ECONOMICS · Report · 08 Dec 2014

In its first meeting since the presidential election, the Monetary Policy Committee (COPOM) started a tightening cycle. It justified the decision (which was not unanimous) by stating that it was due to the inflationary effects coming from the “intensification of the adjustments or relative prices...

Frustration over the GDP Result: Stagnation Should Continue
BRAZIL ECONOMICS · Report · 01 Dec 2014

Some claim that the GDP growth in the third quarter managed to pull the country out of its “technical recession”. Indeed, a third straight quarter of contraction was avoided, but the tiny “recovery” of 0.1% in the third quarter is far from reason for commemoration. It left a nil carry-over to the...

Inflation Stabilizes Near the Top of the Target Interval
BRAZIL ECONOMICS · Report · 24 Nov 2014

The increase of 0.38% in the IPCA-15 for November was below the median of expectations, bringing the rate over the past 12 months to 6.42%, below the top of the target interval (6.5%). All signs are that there are no forces either for a noteworthy acceleration of inflation or of overcoming the ri...

The King is Dead, Long Live the King!
BRAZIL ECONOMICS · Report · 24 Nov 2014

Executive Summary If the nomination, widely indicated in the press, of Joaquim Levy to be the new finance minister turns out to be true, the above proclamation will certainly apply. He’s an economist with a solid academic background and extensive experience in public service, both as treasury ...

Retail Sales Still in the Doldrums
BRAZIL ECONOMICS · Report · 17 Nov 2014

Real retail sales expanded in September, both in the restricted concept (0.4%) and in the augmented one, which includes cars and construction materials (0.5%). With this, augmented sales in the third quarter shrank 1.9%. It was a smaller fall than in the second quarter (-3%), but household consum...

A New Decline in Industrial Production
BRAZIL ECONOMICS · Report · 10 Nov 2014

Industrial output fell 0.2% in September, completing the fifth straight quarter of contraction (Graph 1). The decline observed in the third quarter was smaller than in the second (-0.2% versus -1.9%), which will lead to better GDP performance in the third quarter than in the second (-0.6%). All t...

The Fiscal Disaster of President Rousseff’s First Term
BRAZIL ECONOMICS · Report · 03 Nov 2014

Executive Summary The word “disaster” to describe the Rousseff government’s fiscal policy is no exaggeration. Primary spending has risen continuously alongside abuse of tax relief measures, resulting in a primary surplus totally insufficient to assure the government’s solvency, whether evaluat...

New Letdown from the Fiscal Results
BRAZIL ECONOMICS · Report · 03 Nov 2014

There were no doubts that the fiscal result for September would be bad, but it turned out to be even worse than most observers predicted. The consolidated public sector debt was R$ 25 billion, reducing the primary surplus from 0.9% to 0.6% of GDP (and to 0.4% of GDP after excluding the effects of...

The COPOM’s Decision
BRAZIL ECONOMICS · Report · 30 Oct 2014

In the face of inflation hovering near the top of the target interval and projections for 2015 in the same neighborhood (around 6.4%, Graph 1), there were no doubts that the Central Bank would raise the SELIC rate. The surprise was therefore not the increase, but instead the fact it came just aft...

Consequences of a Distortion in Measurement of the Real Exchange Rate
BRAZIL ECONOMICS · Report · 27 Oct 2014

Executive Summary Since August 2011 the real exchange rate measured in relation to the basket of currencies has depreciated by more than 25%. However, seasonally adjusted monthly exports and imports have continued to fluctuate around an approximately constant level, generating nil trade balanc...

The Growing Current Account Deficit
BRAZIL ECONOMICS · Report · 27 Oct 2014

The current transactions deficit continues to increase. In September it again exceeded the consensus projections, rising to US$ 83.6 billion over the past 12 months, or 3.7% of GDP. This is the highest 12-month deficit since March 2002. The quality of its financing has also been worsening. Since ...

Despondent Outlook for the World Economy and the Reflections in Brazil
BRAZIL ECONOMICS · Report · 20 Oct 2014

There is a climate of despondency in the global economy. Political disturbances have been heightening investors’ risk aversion, triggering a decline in the quotations of 10-year Treasuries. Along with this, concerns have been growing over the risks of deceleration of the international economy. Th...

The Brazilian Economy at a Crossroads
BRAZIL ECONOMICS · Report · 13 Oct 2014

Executive Summary The new government, whichever candidate wins the presidential runoff, will have to face at least four challenges: a) renewed growth; b) fiscal control; c) reduction of the current account deficit, allowing the real to depreciate; and d) control of inflation. Achieving all the...

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