Brazilian Central Bank projects a drop of more than 10% in the country's GDP in the second half of 2020

During a virtual event promoted by Abrainc (Brazilian Association of Real Estate Developers), the president of the Central Bank of Brazil, Roberto Campos Neto, said that the institution believes that there will be a fall of almost 11% of GDP in the second half of 2020. If the forecast is confirmed, the country will enter a technical recession, which is the drop in GDP for two consecutive semesters. Economists point out that the economic crisis in Brazil is more intense than in other countries and estimate that the recovery will be slow.

The June summary was: industry and commerce showed better results than expected, agribusiness was strong, but the services sector showed a slow recovery.

The fall in the level of Brazilian economic activity comes amid the pandemic of the new coronavirus, which has been killing about 1000 people in Brazil every day for several weeks. The pandemic has brought down the world economy and put the world on the road to a recession.

So far, Bolsonaro's government, in addition to the president's denialism, which in the face of thousands of deaths continues to defend things like the use of hydroxocloquine and openly criticizing the mayors and governors who defended social isolation, has done little to face this tragedy that will reverberate in the greatest recession in our history, as everything indicates that Brazil will face an economic fall twice the world average.

Brazilian services and commerce sectors surprise with unexpected growth but do not recover losses in the year, according to IBGE

According to the Monthly Survey of Services, released by IBGE today (12.09.2019), there was a 0.8% growth in the service sector between June and July 2019, in Brazil. Analysts and economists expected growth of around 0.4%. This is the best result since December 2018. However, despite this slight recovery, Brazil's services sector is still 11.8% below the record reached in May 2014 and 1.2% lower than December last year.

Another sector that posted positive numbers this week was the Commerce sector in Brazil. According to the Monthly Trade Survey, released by IBGE, retail sales in Brazil increased 1% in July, compared to June, and had the third positive month in a row. It is the best result for July since 2013 when the advance was 2.7%.

This scenario reinforces the projections that bet on more cuts in the basic interest rate in Brazil, Selic, by the Brazilian Central Bank's Monetary Policy Committee (Copom) in the coming months.

Brazilian agricultural production value hits record: R$ 343.5 billion

According to the Municipal Agricultural Survey (PAM) 2018, released today by IBGE, the value of Brazilian agricultural production hit a record and reached R $ 343.5 billion in 2018, an increase of 8.3% compared to 2017.

Growth was driven by higher commodity prices such as soybeans (13.6%), cotton (52.3%) and coffee (22%), in a year when the grain crop fell 4.7% and the harvested area 0.5%. Despite the favorable results, the 2017 grain surplus was not exceeded in 2018, mainly due to the 16% decrease in Brazil's corn production.

According to the IBGE, "trade disputes between the United States and China, crop failures in Argentina and Chinese demand for herbaceous cotton have boosted the prices of major Brazilian commodities".

Sao Paulo, Mato Grosso, and Paraná were the states with the highest value of agricultural production in 2018 in Brazil.

Argentina declares a default with IMF and banks in an attempt to ease major turbulence in the country's foreign exchange market

Argentine President Mauricio Macri, announced today that he has asked the IMF to revise the maturities of its 56 billion dollar debt beginning in 2021. The measure, which would aim to alleviate the current turmoil in the country. foreign exchange market proves the failure of the neoliberal policy adopted in Argentina and defended by the current Brazilian government of Jair Bolsonaro.

This greatly worsens the situation of Macri, who has already lost primary elections to center-left candidate Alberto Fernández – whose deputy is Cristina Kirchner by a difference of 15 percentage points.

Brazilian President Jair Bolsonaro, in turn, is close to Macri. Bolsonaro has even attacked Fernández, confirming even the possibility of Brazil leaving Mercosur Fernández winning. Macri's possible defeat is largely due to the country's current economic situation. Today, Argentina has inflation of 55% and the basic interest rate is 70% per year.

According to Reuters, the rating agency Standard & Poor’s said on Thursday (29.08.2019) "that Argentina’s decision to "unilaterally' extend maturities on its short-term debt constituted a 'default'". 

A possible global recession could produce the perfect storm for Brazil's already weak economy

Brazil's economy is suffering from very poor performance, with GDP growth for 2019 expected to be around 0.83%. However, due to the emergence of a possible risk of a global recession coupled with a change in Argentina's political landscape (moving from a neoliberal government, Mauricio Macri, to a more developmental government, Alberto Fernández).

With the global economy slowing down, Brazil must face even greater difficulties to get out of the scenario of extremely high unemployment (over 12 million unemployed people) and very little economic growth.

Even with the Pension Reform and the Tax Reform walking the Brazilian National Congress, which decided to act almost independently of the executive power, which through the often absurd speeches of President Jair Bolsonaro greatly harms any political coalition, the country will face economic difficulties to get out of the crisis scenario in which it finds itself.

In recent days, the outflow of foreign capital from the São Paulo Stock Exchange is higher since the one recorded in the global crisis of 2008. According to the website Terra, until the 15th of August 2019 (most recent data), the volume was negative in R$ 19.1 billion. In 2008, the red balance recorded in the year to the end of August was R$ 16.5 billion.

A direct consequence of the search for global security, this outflow of resources from the country will further weaken the Brazilian economy. To make matters worse, studies released this week indicate the collapse of investments in Brazil. Capital used to expand production in the country fell to the lowest level in 70 years in some sectors.

Focus Survey indicates positive Brazilian financial market expectations for Brazilian economy despite the risk of a global economy crisis

According to Reuters, the market's expectation for growth in the Brazilian economy has risen again for 2019 and 2020. The Focus survey released today by the Central Bank indicates that Brazilian economists have come to see the possibility of growth in GDP. 0.83% in 2019 and 2.20% in 2020, compared to 0.81% and 2.10% respectively in the previous week.

This reading seems to be detached from global and regional reality. In the world last week was marked by fear of the world going into recession; In Argentina, the economy minister fell and the current president Mauricio Macri, with fear of losing the elections, decided to adopt a completely populist agenda in the economy.

It will be very difficult for Brazil's economy to grow, which Focus indicates today if these scenarios of global recession and the certainty of the continuing crisis in Argentina, Brazil's main regional economic partner, are confirmed.

Again, as when the election of Jair Bolsonaro occurred, the Brazilian financial market takes a stance much more closely linked to political ideology than the rational readiness of global and regional economic indicators.

Brazil enters in "technical recession" after disclosure of preview of the first quarter of 2019 GDP made today by the Brazilian Central Bank

The Brazilian economy registered a retraction of 0.13% in the second quarter of 2019, according to the Economic Activity Index (IBC-Br) released by the Brazilian Central Bank today. This puts the country in a "technical recession" framework "when you have two quarters in a row of economic contraction i.e. our economy shrinks and things go south."

This index is a preview of GDP, which will be released on August 29 by the Central Bank. The 0.13% decline reported today occurred between April and June 2019 compared to the first quarter of the same year.

The Brazilian Minister of Economy, Paulo Guedes, said today at an event held at the Superior Court of Justice (STJ) that it is not possible to blame the current government for the economic performance of the country.

According to the newspaper Correio Braziliense, Guedes said that "It is still a short time for the government with liberal policies in the economy to present results."

Brazilian services sector falls 1% in June and presents the worst performance of 2019, according to IBGE

The service sector in Brazil had the worst rate for June since 2015 with a drop in the 5 surveyed activities. According to the Brazilian Institute of Geography and Statistics (IBGE), compared to June 2018 (series without seasonal adjustment), the volume of services fell 3.6%. This should again bring down expectations for the 2019 Brazilian GDP.

Brazilian Chamber of Deputies approved the Social Security Reform in the second round; text now goes to the Senate

Pension reform is expected to produce savings of approximately R$ 900 billion over the next 10 years. This number is very close to what the Brazilian financial market expected. Now the text of the Reformation goes to the Senate, but it shouldn't change much.

Even with the approval of the Pension Reform, analysts believe that the year 2019 is already lost. That is, the Brazilian economy must remain stagnant or with very low growth until the end of the year.

The basic interest rate cut of the Brazilian economy, Selic, should continue. The Brazilian Central Bank, through the Copom, cut interest rates from 6.5 to 6% per year. Analysts believe the Copom should cut interest rates again to 5.5% at the next meeting, or at least cut interest rates by 0.25% to 5.75%.

The financial market in Brazil celebrates the approval of runoff of Pension Reform by the House of Representatives; Copom report presented by the Brazilian Central Bank's points toward the perspective for new cuts in the basic economy rates, the Selic

After a vote of 370 votes in favor and 124 against, the Brazilian Chamber of Deputies approved the Social Security Reform. Highlights will now be voted on, which may change some points of the approved text.

According to the website Poder360, The Central Bank announced through the report of the last Copom (Monetary Policy Committee) meeting that the basic interest rate may fall again in the coming months. At the committee's last meeting, interest rates fell from 6,5 to 6 percent a year. This is the lowest rate in the historical series.

According to a study by economist Affonso Celso Pastore, the Brazilian economy will take a long time to improve. Latest indicators worry and point to impending economic recession. To make matters worse, weak data on Brazilian industry, trade, and services, the main drivers of the country's growth, point to a fall in Gross Domestic Product in the second quarter of 2019.

Therefore, even with the prospect of interest rate cuts by Copom, the tendency is for the Brazilian economy to continue at a very weak pace.

According to IBGE, unemployment in Brazil falls 0.7% in the quarter ending in June of 2019, average worker income decreased, and the number of informal workers increased

According to data from the Brazilian Institute of Geography and Statistics (IBGE), the unemployment rate in the country was 12% in the quarter ending June 2019. Now, the total number of unemployed Brazilians is 12.8 million. The index fell 0.7% compared to the quarter between January and March and fell 0.4% compared to the same period last year. On the other hand, the number of self-employed workers hit a record of the historical series, which began in 2012, and reached 24.1 million. The number rose 1.6% from the previous quarter and 5% from the same period of 2018. Therefore, informality in Brazil remains very high by world standards.

The figure released by IBGE indicates that the number of discouraged and underutilized Brazilians has been attenuating the number of unemployed, which serves to mask the reality. If we add to this group the self-employed workers and those still receiving unemployment insurance even with this small increase in the number of employees in Brazil, the scenario remains practically stagnant.

The usual average income of the Brazilian population fell in the same period, reaching R$ 2,290, 1.3% less than in the previous quarter and without significant variation with the same period last year.

In the quarter ending June, Brazil had more than 28 million unemployed people and approximately 5 million despondent people, that is, those workers who gave up looking for work and therefore left unemployment statistics.

Economists believe that releasing just R$ 500 per person at FGTS will culminate in another chicken flight to the Brazilian economy

The release of about R $ 30 billion should be positive, but it should not change much the scenario of economic growth of Brazilian GDP in 2019. Overall, the forecast revisions for GDP in 2019 were very marginal. Nothing very expressive. Most analysts point to a growth of about 0.8% of GDP in 2019, ie very small.

For the former president of BNDES and former Minister of Communications, economist and engineer Luiz Carlos Mendonça de Barros, the measures presented by the government are timid to leverage the Brazilian GDP.

Economy Minister Paulo Guedes himself said in early June 2019 that releasing FGTS money before pension reform would be a “chicken flight”. Now, even though the pension reform is not fully approved, the government decides to adopt the measure.

Yesterday, during the measure's presentation ceremony, Guedes said the FGTS withdrawal will be a permanent income, not "chicken flight," as he himself had said.

For Maranhão Governor Flávio Dino, the "release of the FGTS is a good measure, but it is a trickle in the ocean of national recession."

Dino believes that “the expansion of public works is urgent. It is an emergency debt relief program to improve demand. There are ways. But we need to focus on Brazil. ”

Dino thus criticizes the policy of the current government, which is openly aimed at pleasing the international bond market.

Flavio Dino was verbally attacked by President Bolsonaro during a private conversation with the Chief Minister of the House, Onyx Lorenzoni, captured by TV microphones a few days ago.

Brazilian financial market raises GDP projection to 2019 for the first time in 20 weeks

The Focus report, published by the Brazilian Central Bank every Monday, indicates that projections by Brazilian financial market analysts estimate GDP growth to be 0.81% to 0.82% by 2019. The same analysts consulted by the Brazilian Central Bank continue betting on the growth of 2.10% of the Brazilian GDP in 2020.

The change is related to the approval of the first shift of the Pension Reform by the Chamber of Deputies of Brazil. Even so, the performance of the Brazilian economy is still very poor. Many analysts expect the government to present some kind of measure that could warm the Brazilian economy a bit more.

Economists lowered the estimate for the Brazilian official inflation index (IPCA), which was down to 3.78%. A week ago it was at 3.82%. This year's central target is 4.25%, with a tolerance of 1.5 percentage points to more or less.

Many analysts believe that the Central Bank should, at the next Monetary Policy Committee meeting (Copom), which takes place in the last two days of July 2019, should lower the Selic rate of the Brazilian economy that is now at 6, 5% per annum.

Brazilian GDP should decrease in the second quarter, says IFI (Independent Fiscal Institution)

The IFI (Independent Fiscal Institution), an organization linked to the Brazilian Federal Senate, published a report in which it suggests a new GDP decrease (Gross Domestic Product) in 2019. In the first 3 months of the year, there was a reduction of 0.2%.

If the report published on June 15, 2019, Brazil would be returning to live in a recession, when there have been two consecutive quarters of decline in GDP in relation to the previous quarter.

According to the report, Brazilian industrial production "remains constrained by uncertainties and weak external demand, while confidence indicators indicate consumer and business pessimism, especially with future economic conditions."

For Affonso Celso Pastore, president of the Public Policy Debate Center and the AC Pastore consultancy, Brazil today has "a per capita income that is 9% below the threshold it was at the beginning of the recessive cycle (2014), and that is, we can not expect family consumption to be a driving force in the economy. The country has a very large idle capacity in the industry, and the maturing of infrastructure investments is long (it takes time), so we do not we have the investment being a driving force. We also do not have an impulse from exports. And finally, it is not possible to use fiscal stimuli because the government is doing the opposite, it is making an adjustment, is cutting spending".

To make matters worse, according to economist Rosa Chieza, from the Federal University of Rio Grande do Sul, Brazil today has a "tax burden of 32%, a taxpayer that receives up to R $ 2,000 earmarking almost 50% of its income While we have a huge gap in taxation on income and equity, we need to put more slots in the income tax table, increase the exemption rate, but raise the tax rate, as it spends all its income on consumption of goods and services. a maximum rate of 27.5% to 40%, in order to reduce inequality, while also we charge more from profits and dividends."

The financial market in Brazil warms up after first approval of Social Security Reform

For many analysts, medium and long-term capital must begin to reach the Brazilian economy should the approval of the Pension Reform continue and be approved by the National Congress.

If approval occurs, for analysts, Brazil should grow again in 2020. According to the head of the Economic Policy Secretariat (SPE) of the Ministry of Economy, Adolfo Sachsida, if the reforms are approved, the government will propose a productivity agenda. Sachsida believes that this could make the economy grow again at a faster pace, from 3% to 4% a year, in the long run.

Despite the government's goodwill, very weak data from industry, commerce, and services in Brazil, the main engines of economic growth in the country, point to a fall in Gross Domestic Product in the second quarter of 2019. This means that Brazil can return to a recessionary scenario later this year.

According to Valor Econômico newspaper, real economic data indicate that Brazil "has not been able to recover from the recession, it has 13.3 million unemployed, of whom one in four has been seeking jobs for more than two years. % of installed capacity is idle, 210 thousand commercial companies closed their doors in four years and 6 thousand companies demanded judicial reorganization. The negative effects of the 2014-2016 depression on the Brazilian economy were stronger and went on much longer than expected".

Brazilian financial market fears possible delay in voting on Pension Reform

The Brazilian financial market remains apprehensive to know if it will happen today, 27.Jun.2019, the reading of the Pension Reform report. The delay for the national political framework to discuss, vote and possibly approve the Pension Reform leaves investors in Brazil very apprehensive. Everyone already believes that the year 2019 is lost.

As the inflation framework in Brazil is not worrisome, due to the weakness of the Brazilian economy, everything indicates that in the second half the Brazilian Central Bank will cut the basic interest rates, which are currently at 6.5% per year.

The fear of some federal deputies losing the vote of the Pension Reform, since many are celebrating the feasts of São João in their respective states, can delay the entry of the Brazilian states into the new Social Security. This impasse is delaying the reading of the complementary vote of the rapporteur and federal deputy, Samuel Moreira. 

According to UOL website, "the inclusion of states and municipalities in Pension Reform is necessary because they are also breaking down. The deficit in the states reaches R$ 100 billion today and can quadruple until 2060. However, this inclusion has not yet been made basically because governors and federal deputies are afraid to displease state officials and lose votes."

The number of companies decreases for the second consecutive year in Brazil

According to the Central Business Register (CEMPRE), released today, June 20, 1919, by IBGE, the total number of companies in activity in Brazil was 5 million in 2017, the worst result since 2010, when it totaled 5.1 million. Since the beginning of the economic crisis in 2014, the number of companies declined by 74.2 thousand and the salaried population decreased by 3.2 million.

According to the IBGE News Agency, "the study shows that between 2007 and 2013, there was a continuous growth in the number of companies [in Brazil], from 4.4 million to 5.4 million. In 2014, however, this number fell by 288, 9 thousand organizations and, despite the small increase of 11.6 thousand in 2015, in the following two years the number dropped again to 64.4 thousand in 2016 and 21.5 thousand in 2017."

According to economist Laura Carvalho, the "brutal fall in growth projections" in Brazil combined with the possibility of "a new recession in the first quarter of 2019 brought to the surface the vicious circle caused by insufficient demand in the Brazilian economy."

In the first quarter of 2019, Brazil GDP fell by 0.2%. Two consecutive quarters of contraction mean a technical recession. For many economists, 2019 is already a lost year for Brazil. They believe that a possible economic recovery will only come in 2020.

Layoffs outnumber hirings in Brazil

According to consultant Robert Half, in the first quarter of 2019, hirings were rescheduled in just three professions: programmers, quality inspectors, and database administrators grew their "cadres" in Brazil between January and March. Engineers had the most negative balance, with the closing of 1,003 jobs. Following are sales manager (567 closed positions), lawyer (486 vacancies closed) and financial manager (484 vacancies closed).

According to the Folha de S.Paulo newspaper, "the rate of unemployment of skilled labor — which has higher education — stood at 6.1% in the first quarter of this year, the highest since the beginning of 2017."

Thus, once again the careers in technology are armored in the face of the crisis. Hence the undeniable importance of government to understand the demands of the market and be ready to train workers and respond to changes in the labor market. However, nowadays, while the Brazilian labor market continues to look for coherent profiles with the technological revolution in progress, the country is still at odds over the teaching of technology in schools and universities. So far the government of Jair Bolsonaro has not presented any plans to meet these needs in the area of education.

In recent days, Education Minister of Brazil Abraham Weintraub has stated in an event that "there is no condition to maintain the current structure of public education."

Toyota announces the dismissal of 840 employees at factories in Brazil

After a reduction in exports, Toyota's plants in Sorocaba and Porto Feliz, in the interior of the state of São Paulo, in Brazil, will have 840 layoffs. Most of this group is made up of employees hired for a set time for the opening of a third shift, which will cease to exist. The company said it will work with two shifts in the units as of August 5, 2019. According to the metalworkers' union, further layoffs may occur, as the company is stocked with 32 days of sales.

The factories where the layoffs are occurring are responsible for the production of the Yaris and Etios models. So far, three hundred and forty officials have already been dismissed and another 500 will not have their contracts renewed.

According to the magazine Quatro Rodas, a Brazilian automotive publication, Toyota defended itself by stating that the layoffs are the result of "a sharp drop in sales to Argentina. The neighboring country accounts for 93% of the demand for vehicles manufactured for export. turn account for 30% of production in Sorocaba."

Long-term unemployment grows in Brazil

According to data released by the Institute of Applied Economic Research (Ipea), the number of Brazilians seeking employment for more than two years rose 42.4% between the first quarter of 2015 and the same period in 2019. Since then, the number of people in these conditions has reached 3.3 million. The situation affects women and the North and Northeast regions more intensely. According to Ipea's assessment, unemployment should only begin to subside as of next year.

According to the Valor newspaper, the percentage of long-term unemployed in the country increased from 17.4% in the first quarter of 2015 to 24.8% in the same period this year, reaching a level of 3.3 million people.

According to the G1 website, the study concludes that the Brazilian labor market, therefore, remains quite deteriorated, with large numbers of unemployed, discouraged and underemployed.