Ibovespa falls more than 2%

The main index of the São Paulo Stock Exchange, the Ibovespa, had a very negative result today, May 13, 2019. This was the announcement of retaliation from China to the US surcharge, which began at dawn last Friday.

This dispute between China and the US coupled with the fact that financial market analysts have reduced for the 11th consecutive time their projections for growth of the Brazilian economy in 2019. According to the Focus Bulletin report released on Monday (13) by the Central Bank (BC), the economy is expected to grow only 1.45% in 2019. However, there are analysts indicating that this growth should be around 1%.

This is, for example, the projection for the Gross Domestic Product (GDP) made by Itaú, one of the largest private banks in Brazil. For Itaú, Brazil is expected to grow only 1% in 2019. Itaú also reduced next year's growth forecast from 2.5% to 2%.

Brazilian financial market expects figures from US economic activity

Unemployment data, salary data and various other information on the US labor market will determine the behavior of the financial market in Brazil today.

If the payroll numbers are positive, with strong economic growth, interest rates would remain stable. This would lead foreign investors to seek other places to invest in. The positive US scenario may, therefore, lead Brazil and other emerging countries to receive more investment.

In case the US data is worse than expected, the dollar and the stock market in Brazil must undergo strong changes.

This is coupled with reductions in growth assessments of the Brazilian economy, which grew by more than 3% from the beginning of 2019 to around 1% and 1.5% per year.

Brazil sells 10 million bags of coffee in the first quarter of 2019

Brazil sold 10 million 60kg bags of coffee in the first quarter of 2019. The United States and Germany are the largest importers of Brazilian coffee. In the first quarter of 2019, the US imported 18.2% of the 10 million 60kg bags of coffee exported by Brazil in the first quarter of 2019. Germany was responsible for the purchase of 17.2% of the total of 10 million 60kg bags.

Italy, Japan, Belgium, Turkey, UK, Russia, and France are other major buyers of Brazilian coffee. However, China was where Brazilian coffee exports grew the most. The advance of coffee drinking in place of tea, especially among the younger population, is making China the newest promising market for Brazilian grain exports. In 2018, sales of green coffee from Brazil to China more than doubled.

This is a problem now because Jair Bolsonaro talked tough on China during his presidential campaign. For him, China, the largest trading partner of Brazil, acts as a predator, not a partner. This could greatly undermine the growth in commodity sales such as coffee, soybeans and iron ore to the Chinese. If the current government does not create a climate of commercial war with China, which would be very damaging to the Brazilian economy, coffee exports should continue to grow.

Brazilian coffee exports grew by 15% in 2018. Many experts believe that Brazilian coffee exports should continue to grow in 2019.

Jair Bolsonaro has worse evaluation among presidents of first mandate since the democratization

According to the Datafolha research institute, 30% of Brazilians consider the Bolsonaro government bad, a rate similar to those who considered the government good (32%) or regular (33%).

In 100 days of rule, Bolsonaro's approval fell from the 49 percent expected to be a good government, from January's Ibope poll to the current 32 percent who think his government is a good government according to Datafolha.

According to analysts like Vinicius Torres Freire, the "frustrations of 2019 could lead the country to the fatigue of an economic adjustment that has not yet occurred."

Added to this, according to FT, is the fact that China started to boost purchases of US agricultural products, including 1.7 million tons of soy and 178 thousand bales of cotton that were previously imported from Brazil.

In recent years, agribusiness exports have ensured surpluses in the trade balance.

During the presidential campaign, Bolsonaro portrayed China, Brazil's largest trading partner, as a "predator who seeks to dominate key sectors of the Brazilian economy." The speech of the then-candidate was very badly received by the Chinese government.