Reduction in the pace of growth of the global economy should worsen the situation of the Brazilian economy

The resurgence of the commercial confrontation between China and the United States added to the slowdown of the European economy will affect the growth of the Brazilian GDP.

In Brazil, the Social Security Reform proposed by Jair Bolsonaro's government has not yet been able to raise enough votes in Congress to approve this change. With this, the country continues with serious problems in its public accounts.

The fact that the Brazilian reform agenda does not move in the National Congress greatly affects investments in the country.

The average annual GDP growth since 2016 is at 1.5%. By 2019, the forecast, which at the beginning of the year reached 3% GDP growth, is now around 1.5%. There is a general perception of distrust in Brazil. Few economic agents believe that the country will leave this almost stagnant picture.

To make matters worse, the unemployment picture continues to rise, an indicator that points to a stagnant economy. The Brazilian industry, an important driver of the economy, is experiencing an evident process of the deindustrialization of the country. This reduces the size of Brazil in the world economy.

So far, the current government has not presented any strong policy aimed at the development of the Brazilian economy. There is, for example, no inducement of growth through state investment in infrastructure works.

To get an idea of what could be done, Brazil's numbers on basic sanitation have stagnated for about three years, which means that little or no investment has been made in this sector. There are currently 35 million people in Brazil without access to the drinking water network, 95 million people live in places without sewage collection, and only 46% of sewage is treated in Brazil.

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.

Debt and unemployment hit young Brazilians

According to SPC Serasa, 4 out of every 10 young Brazilians have a debt that has already won and has not been paid. Unemployment is the main reason for the very high level of indebtedness among young Brazilians. According to the website Poder360, the unemployment rate among young Brazilians is 30%.

This same survey carried out by SPC Serasa pointed out that at least one in four Brazilians who bought with credit cards entered the revolving credit in February 2019, a month in which the average annual interest rate charged by this modality loan was in 286.9% per year in Brazil.

The high level of unemployment among young Brazilians and the inexistence of other cheaper lines of credit ends up pushing a multitude of young people to one of the most expensive loan modalities in the world.

This is the scenario for a country with 27.9 million unemployed/underemployed, 63 million defaulters and whose banks charge the highest spreads in the civilized world. The current government, and also the previous government, does nothing to change the situation. On the contrary, it uses the Central Bank to impose norms capable of reducing the performance of the Fintechs. An example of this is the Resolution 4.658 of the National Monetary Council. This rule makes it more difficult to comply with the technical, legal and economic adjustments imposed by National Monetary Council (CMN) Resolution 4.658, which, in turn, diminishes the capacity of the Fintechs and reduces the supply of credit in the country.

Goldman Sachs warns about Brazil's industrial scenario

After the Brazilian Institute of Geography and Statistics (IBGE) pointed to a drop of 1.3% in March 2019 in Brazilian industrial production, Goldman Sachs warned that the economic crisis that currently affects Argentina may impact negatively the Brazilian industrial production.

As reported in the Poder360 website, Argentina is Brazil's third largest trading partner. According to data from Brazil's Ministry of Industry, Foreign Trade and Services (MDIC), between January and March 2019, the value of exports to Argentina totaled US$ 2.34 billion.

Therefore, the Brazilian Industry must be impacted by the Argentine economic crisis. In addition to undermining Brazilian exports and industry, the Argentine situation serves as a warning for the country, said Alberto Ramos, the chief economist for Goldman Sachs in Latin America.

For Ramos, since the end of Dilma Rousseff's first term in Brazil, there has been a need to make a fiscal adjustment.

Brazilian industry lost the first quarter of 2019

Industrial production fell 1.3% in March 2019 compared to February 2019, in the seasonally adjusted series, the Brazilian Institute of Geography and Statistics (IBGE) announced today. Overall, Brazilian industry shrank -2.2% and the first quarter of 2019 closed negative.

Still, in March of 2019, the level of industrial production was 17.6% below the peak of the historical series of the IBGE, which was registered in May 2011, during the Dilma Rousseff government.

To make matters worse, industrial production fell by 6.1% compared to March 2018. The percentage of Brazilian households with debt (in arrears or not) reached 62.4% in March 2019. The index is higher than 61, 5% from February 2019 and 61.2% from March 2018. This scenario of low economic activity in the country greatly limits the companies' indebtedness capacity.

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.

Companies of Brazilian deputies and senators owe R$ 320 million to Social Security

The website Poder360 indicated that 48 politicians fulfilling the mandate of federal deputy and senator in the Brazilian National Congress are owners, partners or presidents of companies that add up to R$ 320 million of social security debts with the Union.

This means that at least 48 votes for a possible Pension Reform will be given by individuals whose companies have debts with the National Social Security Institute (INSS).

Meanwhile, a group of businessmen who support the Social Security Reform opens a lobby office in Brasilia to try to avoid that the reform, considered vital for the resumption of the growth of the Brazilian economy, is barred in the National Congress.

This group includes Flávio Rocha, owner of Riachuelo, who according to Valor Econômico newspaper has already criticized Brazilian rules for labor inspection in a condition analogous to slavery, and Luciano Hang, owner of Havan, which was, according to El País, convicted of INSS's evasion and the crime of currency evasion and money laundering.

Citi Brazil again lowers its estimate for the growth of the Brazilian economy

Citi Brazil now expects Brazil's Gross Domestic Product (GDP) to increase by 1.4% in 2019. This forecast is lower than the 1.8% forecast for April, well below the 2.2% previously estimated by the same bank at the beginning of the year.

The weaker growth is, according to Citi, the steady increase in the estimates for the unemployment rate in Brazil.

The Citi also predicts a 30 percent probability that the Brazilian Central Bank will start cutting interest rates in the second half of 2019.

Cost of living increases for the poorest in São Paulo

O custo de vida em São Paulo, a maior cidade do Brasil, aumentou 5,10% para a população mais pobre no primeiro trimestre de 2019. For the richer classes, the increase in the cost of living in the same period was 3.67%.

The Cost of Living Index (ICV) in the city of São Paulo, which is calculated by the Department of Statistics and Socioeconomic Studies (Dieese), indicated an increase in the cost of living after analyzing the prices of 10 groups, including food, transport, recreation, personal expenses. Among them, food and transportation had the highest increases, with 1.36% and 1.26% respectively.

Meanwhile, preview inflation in Brazil accelerated to 0.72% in April, the highest for that month since 2015. The number surpassed expectations. For example, a Reuters survey with Brazilian economists estimated a 0.69% rise for the same period.

On the other hand, the Consumer Price Index (CPI) index of the Institute for Economic Research (FIPE) increased by 0.29% in April and accumulated inflation of 1.93% in the first four months.

One in four Brazilians is stuck at very high credit card interest rates

One in four Brazilians who made purchases on the credit card in February 2019 entered the revolving credit and started to pay very high interest rates. The average interest rates charged by credit card companies in Brazil in February 2019 were around scary 286.9% per year, according to a survey conducted by SPC Brazil (Credit Protection Service) and CNDL (National Confederation of Directors Shopkeepers).

Most of the credit expenditures in Brazil in February 2019 were food (66%), medicines (46%), clothing (36%) and fuel (35%).

Charging interest of 286.9% a year for those who bought things like medicines and food is producing a multitude of citizens in debt in Brazil. In 2018, 62.6 million Brazilians reached the end of the year with some backlog, which represents 41% of the country's adult population. Meanwhile, Brazilian banks charge the highest spreads in the civilized world and cut credit lines.

In a country where the population outside the workforce has reached the frightening number of 65.7 million people, it is understandable to understand that a person who is unemployed and can not get a less expensive line of credit ends up falling on the revolving credit and becoming a prisoner of unpayable debts on the credit card.

The continued rise in unemployment also increases the level of population indebtedness, but the government does nothing at all. In a picture like the current one, there are those in Brazil who defend a ceiling on the value of interest on purchases of basic necessities such as medicines and food.

According to Ibope, 35% of Brazilian voters approve Jair Bolsonaro's government

A survey by Ibope indicated that the approval of Jair Bolsonaro's government is about one-third of the electorate. According to the institute, the current government approval is at 35%. 

The last such survey by Ibope in December 2018 indicated that 64% of Brazilians voters thought that Bolsonaro's government would be good or great. Now, 45% of Brazilians voters believe that Bolsonaro's government is good or great.

The survey of Ibope was made between April 12 and 15 and heard 2,000 people in 126 municipalities. This is the first survey commissioned by CNI since Bolsonaro took office.