COVID-19 takes down Brazilian industrial production

According to IBGE (Brazilian Institute of Geography and Statistics) today, the coronavirus pandemic led to the fall of industrial activity in the country from February to March. This is what the Regional Monthly Industrial Survey points out. It is the first time in eight years that all 15 surveyed locations have retreated. The closest to this result occurred in May 2018, with the truckers' strike, which brought down industrial production in 14 of the 15 locations.

According to a survey carried out in partnership by the Brazilian Institute of Economics, of the Getulio Vargas Foundation (FGV / Ibre), and The Conference Board (TCB), Iace (Compound Background Indicator of the Brazilian Economy) fell 10.1% in April of 2020 in compared to March of the same year. The index fell from 112.6 to 101.2 points, the biggest drop in the historical series started in 1996.

Informality advances in Brazil; low wages are now the norm in the country

High informality and low wages were the labor market scenario in Brazil in 2019. A survey by Pnad (National Household Sample Survey) indicated that unemployment fell, but with increasing informality and falling average incomes.

According to the Underground Economy Index, calculated by the Brazilian Institute of Economics of FGV (Fundação Getúlio Vargas), informality is still responsible for a significant portion of the Brazilian economy, having moved R$ 1.2 trillion in the 12 months between June 2018 and June 2019, equivalent to 17.3% of Brazilian GDP. This is the highest value in the last eight years. The growth in informality also increases the production of goods and services that are not declared to the government and the tax evasion of the country. In the 12 months between June 2018 to June 2019, the index advanced 0.1%.

This scenario is strengthened by the emergence of new forms of work, with applications that stimulate informality and expand the outsourcing of employment in Brazil.

According to the Institute of Applied Economic Research (Ipea), informal job vacancies are responsible for much of the small generation of jobs in recent years in Brazil. Currently, the country has over 11 million unemployed. Still, according to Ipea, these new informal jobs are behind the drop in productivity and the slow recovery of the Brazilian economy after the recession from 2014 to 2016.

Another problem produced by the high informality in Brazil is the reduction in the level of social security contributions, which worsens the country's fiscal issue. In addition, informality puts people in a situation where there is no fixed income, which limits their access to credit. In informal work, the worker also loses access to any kind of legal protection, does not receive vacation, meal vouchers or transportation allowance, benefits that formal work provides.

Currently, according to IBGE data, Brazil has 38.8 million informal workers. This total is 41% of the total employed persons in Brazil (93.8 million), that is, they represent 4 out of 10 Brazilian workers.

Inequality does not stop growing in Brazil and already reached 23.3 million people; unemployment reaches 12 million people

According to a study by FGV Social economist Marcelo Neri, Brazil faces the longest period of increasing inequality in its history. There are already 17 consecutive quarters of the increase in income concentration in the country. The survey also notes that the number of poor grew in the country and reached 23.3 million in 2017, the most recent data. These are people who live on less than 233 reais per month.

To make matters worse, more than 13 million Brazilians live in poverty or extreme poverty, according to data released this week by the Unified Registry of the Ministry of Citizenship.

Unemployment continues to erode Brazilian society. According to IBGE, 3.3 million unemployed people have been looking for work for at least 2 years in the country. This number corresponds to 26.2% of the 12.8 million Brazilians who were unemployed in the second quarter of 2019.

Meanwhile, the latest Focus Report, released by the Brazilian Central Bank, predicts that the economy will grow a meager 0.81% in 2019. A very small number in the face of rising inequality and unemployment affecting Brazilian society.

Cost of living in Brazil: IGP-M slows in July, a rising dollar and financial market betting massively on Selic interest rate cut

According to the Getulio Vargas Foundation (FGV), the General Price Index - Market (IGP-M) decelerated to 0.40% in July after showing a high of 0.80% in June. With the July result, the IGP-M accumulated high of 4.79% in the year and 6.39% in 12 months.

Meanwhile, the Brazilian financial market is betting heavily on the 0.50% cut in the economy's base interest rate, the Selic, which is currently at 6.50%.

Some more cautious analysts believe that the Brazilian Central Bank, at the next Copom meeting to be held tomorrow, July 31, should cut Selic by only 0.25%, leaving the annual interest rate at 6.25% per year in Brazil.

The dollar price in Brazil closed again high yesterday, July 29. The US currency ended the day at 0.29% appreciation, selling at R$ 3.7830.

Level of construction jobs in Brazil was practically stagnant in the first four months of 2019

The civil construction sector in Brazil generated 20 thousand jobs in the first four months of 2019. Data compiled by the FGV and the Civil Construction Industry Union based on Caged, the number of people employed in the civil construction sector in the period increased by 0,88% compared to the same period in 2018. The employers' union saw growth well below the expected resumption. The projection for GDP expansion in construction fell from 2.0% in early 2019 to 0.5% now.

However, if seasonal effects are disregarded, employment in the Brazilian construction industry would have registered growth of 0.08% in April (+1 954 jobs). At the end of this month, the sector employed 2,314,065 workers in Brazil. With this growth of only 0.08%, it seems that the country is far from the resumption of economic growth predicted by many analysts in early 2019.

As I have written here, this error is the result of the bet and support that many economic agents gave the Bolsonaro government. "In early 2019 financial institutions, according to this same bulletin Focus, forecasted a 2.6% growth in the Brazilian economy this year. However, this bet on the world of finance was mistakenly based on a very positive judgment of Jair Bolsonaro's ability to lead the country's economy".

Brazilian construction sector confidence falls in May

According to the Getulio Vargas Foundation (FGV) reported today, the confidence of the construction sector fell 1.8 points in May compared to April, reaching 80.7 points.

The average price of residential real estate in Brazil rose more than the level of sectoral inflation measured by the National Construction Cost Index (INCC), according to a survey conducted by the Brazilian Chamber of Construction Industry (CBIC).

Despite this scenario of lack of confidence and rising real estate prices, the Brazilian Chamber of Construction Industry (CBIC) believes that sales and launches of residential real estate in the country are expected to grow around 10% to 15% in 2019.

Brazilian consumer confidence index retreats for the 4th consecutive month

Getulio Vargas Foundation (FGV) released today that the Brazilian consumer confidence index declined 2.9 points in May compared to April, from 89.5 to 86.6 points.

This is the lowest level of the index from October 2018, when it stood at 85.4 points. Currently, the consumer confidence index accumulates a loss of 10 points in 4 months.

According to Viviane Seda Bittencourt, "the result of May 2019 shows a significant increase in consumer dissatisfaction with the current situation, especially among families with lower purchasing power. A change in this situation seems to be conditional on the reduction of the high levels of political and economic uncertainty observed in the country today. "

The Brazilian economy has one of the smallest growths on the planet

A study made by the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre/FGV) points out that, between 2011 and 2020, the expansion of the Brazilian economy should only surpass that of 18 countries among the 191 monitored by the International Monetary Fund (IMF).

According to the IMF, Brazil is expected to grow about 0.9% between 2011 to 2020, an estimate lower than the expected average in Latin America (1.7%) and global emerging economies (4.9%).

Unpredictability stalls Brazil's growth, whose GDP grew by 1.1% in 2018 and is expected to grow by less than 1.5% by 2019.

Four years ago, in April 2015, the IMF released some very pessimistic forecasts for Brazil for the decade 2011-2020, pointing to average growth of only 1.8% per year in the period. Today, we know today that these forecasts were extremely optimistic: we had two years of GDP fall of 3.5% and the peak of inflation in double digits. Worse, the average annual growth in the decade should run a frightening 0.8%, setting the second decade lost in a generation.

According to the economist Roberto Dumas, from the economic point of view, the 1980s in Brazil were called the "lost decade" due to a rampant inflationary process, public accounts in total uncontrolled, contracting with the International Monetary Fund ), as well as a strong devaluation of the currency due to ill-prepared economic plans.

Brazil loses placement of seventh largest economy on the planet to Indonesia

Brazil is no longer the world's 7th largest economy. According to the IMF, the Brazilian share of world goods and services production, which was 4.4% in 1980, reached 2.5% last year, the lowest rate ever since. The data refer to the share of global GDP in purchasing-adjusted dollars, which reflects differences in the cost of living between countries. As a result, in 2018, Brazil lost the position of the seventh largest economy in the world, which it had held since 2005, to Indonesia. The difference is that Indonesia's GDP has grown above 5% a year since the Asian crisis of 1998.

The figures indicate that Brazil's relevance to the global economy declines considerably after six years of the economic crisis that began under Dilma Rousseff's government, passed by Michel Temer's government and is now under the administration of Jair Bolsonaro. The Brazilian economy is practically stagnant compared to growth of 1.2% in the last two years and the growth forecasts for 2019 are getting smaller. It is undeniable that the last three governments, the last Brazilian governments (Dilma, Temer, and Bolsonaro), have committed many misconceptions when directing the country's macroeconomic policies.

According to Laura Carvalho, an economist, and professor at University of São Paulo (USP), Brazilian governments should collect more taxes from the rich and make investments in innovation and services go hand in hand. For her, the recessive adjustments proposed by the current government will continue amid the scrapping of physical and social infrastructure.

For the economist, Nelson Marconi, of the Getulio Vargas Foundation (FGV), the fiscal adjustment is the big issue of the Brazilian economy. According to him, the proposed Pension Reform of the government of Jair Bolsonaro will worsen the living conditions of those who need it the most because it does not fight the privileges and reaches mainly low-income workers.

Brazil's GDP growth to be the lowest in 120 years

A projection by the Instituto Brasileiro de Economia (Brazilian Institute of Economics) of the Fundação Getúlio Vargas (Ibre/FGV) indicates that the average growth of the Brazilian economy should be only 0.9% per year between 2011 and 2020. If everything continues as it is, will have its weakest performance in 120 years.

According to Ibre/FGV analysis, the weak performance of the economy reflects the successive deficits in public accounts since 2014 and two consecutive years of recession in 2015 and 2016.

This rate is lower than the 1.6% of the so-called 'lost decade' in the 1980s when the Brazilian government declared a moratorium and suspended the payment of international creditors.

In 2015 Brazil's GDP fell by 3.5%. By 2016, the fall in GDP was 3.3%.

According to the Ibre/FGV researcher, Marcel Balassiano, the country would have to grow around 5.7% in 2019 and 2020 for this decade also not be considered a lost decade.

Overall, Brazil's economic recovery has been slow, the industry is struggling to catch up, and the Brazilian state is headed for a few more years of fiscal deficits.