The Brazilian economy and its slow recovery; according to consultancy McKinsey, Brazil grows well below global average

The Brazilian GDP growth in the second quarter of 2019, 0.4% over the first three months of the same year, confirms the existence of a low growth cycle in Brazil since the end of the recession in 2016.

The advance in the Brazilian GDP is undeniably too small for the size of the problem. There are more than 12 million unemployed and the growth below 1% forecast for this year does not solve this problem at all. With this level of unemployment, consumption in the country does not grow, as jobless people stop consuming to spend on what is completely essential.

There is an undeniable lack of dynamism in the Brazilian economy. To overcome this, Brazil needs public policies focused on infrastructure urgently, but this scenario is not on the Brazilian horizon. On the contrary, there are few measures aimed at infrastructure investments, especially from the federal government.

To meet the global average, Brazil needs to invest 4.7 percent of GDP in infrastructure, according to a study by consultancy McKinsey, prepared at the request of the National Bank for Economic and Social Development (BNDES) and the International Finance Corporation (IFC) of the Bank. Worldwide. Between 2000 and 2016, however, Brazil applied on average only 2.1% of GDP on infrastructure.

According to economist Laura Carvalho, "the return of direct public investment in infrastructure to the pre-crisis level would have high stimulus power, even if it were entirely covered by the elimination of tax cuts, subsidies and other lower multiplier expenses on job creation and income and/or higher income taxes for the rich." However, this is not on the Brazilian political horizon either. Therefore, everything indicates that Brazil will continue to show small GDP growth. As a result, labor supply will remain very weak in Brazil.

One of the sectors that showed improvements was the construction industry in the region of the city of São Paulo, but this is still little to reactivate Brazil's economy.

The Brazilian GDP growth forecast for 2019 to be 0.8%, according to bank UBS; numbers released by IBGE today showed that the Brazilian economy underperformed and grown 0.4% in Q2 2019

Bank UBS presented a new growth forecast for Brazil's Gross Domestic Product (GDP) for 2019 and 2020. According to UBS, in 2019, the estimate for the increase of the Brazilian GDP fell from 1% to 0.8%. Already referring to the years 2020, the institution believes that the index will grow only 1.5%, compared to 2.2% previously predicted. Therefore, in a scenario of economic stagnation, UBS forecasts even lower performance than expected.

According to economist Laura Carvalho, the current recovery of the Brazilian economy is among the slowest in recent Brazilian history. According to Laura de Carvalho's estimates, "GDP (Gross Domestic Product) in force in the first quarter of 2014 would not be reached until December 2021 - 20 quarters after the end of the recession."

According to data released today by the IBGE, the Brazilian economy underperformed and grew only 0.4% in the second quarter of 2019. This result was driven by a slight recovery of the Brazilian industry. However, compared to the same period last year, the GDP was up 1%.

Also according to IBGE data, the Brazilian extractive industry had a record drop: -9.4%. This was the sharpest drop in the historical series of this sector. Vale's crimes in Brumadinho (where 248 people died and 22 others are missing) and the paralyzing of other dams for inspection in an attempt to prevent further tragedies. This, added to the rains in Pará impacted the iron ore industry in Brazil in the period.

Although he proclaims himself liberal, Paulo Guedes, the economy minister of the Brazilian government, studies liberating up to 35% of the FGTS to stimulate the economy

The idea is to give money to the population for it to warm the economy. This proposal of heterodox shock, in the best Keynesian model, is of the ultra-liberal Paulo Guedes.

In addition to the release of the FGTS funds (the FGTS is a savings intended for the Brazilian worker. The fund aims to ensure the worker in difficult situations, such as dismissal without just cause), there will also be another round of PIS / Pasep withdrawals. The objective of the plan is to try to revive the economy, via consumption, still in 2019 - the government projection is GDP growth of 0.81%. The Ministry of the Economy wants to allow workers to get up to 35% of the resources of their active accounts of the Working Time Guarantee Fund. The measure is expected to inject up to R$ 42 billion in the economy.

Guedes, faced with increasingly blatant evidence that the current stagnation of the Brazilian economy occurs due to a chronic lack of demand, decides to adopt an openly Keynesian policy.

But even the economists who are progressive and close to the Brazilian left-wing believe that the measure is insufficient to remove the country from the crisis. According to economist Laura Carvalho, "such effects will be temporary and insufficient to counteract the negative impact of cutting public investments and the global slowdown on our economy."

However, economist Laura Carvalho also points to the difference between Guedes' speeches during the political campaign and his actual role as minister.

Carvalho points out that the ultra-liberal Guedes, during the presidential campaign held in 2018 in Brazil, made a "discourse filled with cliché ultra-liberal solutions, among them the radical flexibilization of labor laws, tax cuts for entrepreneurs, privatization of all public assets and indiscriminate commercial opening as a way to guarantee economic growth and job creation. " Now, faced with the reality of the Brazilian economy, Guedes decides to adopt "a measure whose rationality is supported by the Keynesian multiplier of autonomous spending."

The same happened with the government of the also liberal Maurício Macri, in Argentina. In power, he adopted unorthodox measures in the economic area.

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.