Trump maintains a blockade on OECD and not fulfill the agreement with Bolsonaro

The United States has maintained the impasse in the entry of new members into the Organization for Economic Cooperation and Development (OECD). With that, Trump failed to comply with the promise made to Bolsonaro during the meeting between the two heads of government in Washington on March 19.

The Brazilian government's expectation was that the Trump government would take advantage of the meeting of the OECD Council of Representatives, held today, to unblock the demand from Brazil and other countries to join the OECD.

Washington did not change its document to include Brazil in its proposal alongside the Argentine government, which has its entry into the OECD backed by the Trump government.

Inefficiency in public spending costs billions to Brazilians according to IDB

A study by the Inter-American Development Bank indicates that inefficiency in public spending causes a loss of 3.9% of Brazilian GDP. The survey points out that in Brazil, inefficiency in the use of these resources generates a loss of US $ 68 billion per year, equivalent to 3.9% of GDP (Gross Domestic Product).

The IDB says that Brazil is, in relative terms, the country with the highest spending on Social Security in Latin America, spending 7 times more on the older population compared to the youngest. This framework points to the undeniable need for a Pension Reform.

According to the Folha de S.Paulo newspaper, according to the IDB calculations, Brazil could save the equivalent of 1.6% of GDP if it guaranteed that the resources of its income transfer programs would be passed on to the poorer sections of the population, diversion to the richer strata. For the bank, this is what happens with subsidies and tax benefits granted by the Brazilian government, for example, to sectors such as the automobile industry.

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.