Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 06 Mar 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

As the contents of the plea bargains reached with Odebrecht executives become public, the political climate will become tenser, with possible reflections on Brazilian asset prices. These prices have behaved favorably so far, based mainly on the hypothesis that Temer will complete his term and that the social security reform package will be approved without relevant alterations. The tension will heighten in the next few weeks, increasing uncertainty and the volatility of the markets. However, the news about the economy is generally good. There are signs that the long and deep recession is nearing its end, and the outlook (coming true) for bumper harvests of key crops is causing food prices and inflation as whole to fall, permitting more pronounced monetary easing than most observers envisioned. On the other hand, the labor market is still fragile. The good news is that the recession is nearing its end, but recovery will be very slow.

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