Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 03 May 2021 by Affonso Pastore, Cristina Pinotti and Paula Magalhães

More than 400 thousand people have died in Brazil from Covid since its arrival in the country. The strong recent upsurge, which raised the 7-day moving average death toll to 3.2 thousand a day, made April the worst month of the pandemic. With this, the cumulative mortality in the first four months this year has already surpassed the number of deaths during 2020 as a whole. The return of social distancing rules and informal behavior has apparently produced effects, since the moving average of daily deaths declined to about 2.4 thousand last week. Since these rules are being relaxed, and vaccination continues to be slow – and intermittent in some places – there’s no telling whether this recent deceleration pattern will continue or whether the country will face a new wave of contagion at the start of the second half of the year, during winter.

The dramatically negative health situation, the recognition that the result can be partly blamed on the federal government’s ineptitude, and the interruption of the relief to the most vulnerable contingent of the population, has decreased popular support for the Bolsonaro administration. The establishment of a special congressional investigating committee (CPI) in the Senate by determination of Supreme Court Justice Luis Roberto Barroso, seconded by the rest of the justices, to probe the executive branch’s actions and omissions in formulating policies in response to the pandemic, is the best example, although not the only one, of this process. In the struggle for political space and money, the parties of the Centrão coalition have imposed important defeats on Guedes, whose team and stature have unquestionably suffered setbacks. The performance of the economy will continue to depend crucially on the pace of vaccination, which mainly depends on the supply of vaccines, given that the country’s vaccination capacity is robust. The political/fiscal risks continue to put pressure on the exchange rate, obliging the Central Bank to continue raising the interest rate and preventing the country from fully benefiting from the better external conditions.

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