Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 04 Oct 2021 by Affonso Pastore, Cristina Pinotti and Paula Magalhães

With a good pace of vaccination against Covid-19, 71% of Brazilians have now received at least the first vaccination dose. With this excellent adhesion, together with the widespread use of masks, for the past few weeks the moving average of daily deaths has been oscillating around 500. All the same, the number of deaths has reached the tragic level of 600 thousand. The confrontation of Bolsonaro against the Justice System and other democratic institutions reached a peak on September 7th (Independence Day), with his incendiary speech at the manifestation in São Paulo. But the absence of the expected support – either in the streets or from the armed forces – left him no other alternative than to soften his language, a reflection of his political erosion. With the executive branch weakened and the Centrão insatiable, it is now evident that the reforms promised by Arthur Lira are only mirages, and that shabby artifices, such as increasing the IOF rate, have returned to the menu of “adjustments”, accentuating the fiscal risk and putting pressure on the exchange rate. Inflation is now running in two-digit territory, requiring higher interest rates, which will hamper economic growth in 2022 and the president’s chances of reelection.

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