Brazilian millionaires flee the country

A survey by AfrAsia Bank in partnership with the New World Wealth consultancy pointed out that 1% of Brazilians with more than one million dollars in account left the country in 2018. The reasons for the exodus include concerns about security and economy, as well as search for higher quality education and better professional opportunities. Approximately two thousand millionaires left Brazil in 2018.

In 2019, Australia was the country that received the most immigrant millionaires, were 12 thousand in total.

The richest people in the world are also the most mobile. High-net-worth individuals (HNWIs) – people with wealth in excess of $ 1 million – may decide to migrate and change for a variety of reasons.

In some cases, they are attracted to jurisdictions with more favorable tax laws or criminality, as is the case with Brazilian millionaires.

Brazilian government confused about cuts in Education area

Since taking up the post of Education Minister on April 8 of 2019, Abraham Weintraub has already been confused about the numbers and cuts he said he will make in Brazilian education - he took over after the resignation of Ricardo Vélez Rodríguez, a minister who was marked by chaos in his management of the Ministry of Education.

First, on April 30, Weintraub declared that he would cut 30% of the budget of federal universities that allowed a "shamble" in his campuses. Such universities would be the University of Brasília (UnB), the Federal University of Bahia (UFBA) and the Fluminense Federal University (UFF). 

The decision was seen by the media and by students and teachers as a kind of political retaliation, as these universities promoted debates and critical thinking against the current government. This feeling gained strength mainly because UnB, UFBA, and UFF are among the best in Latin America. Unb moved from 19th position in 2017 to 16th in the following year. The UFBA went from the 71st to the 30th.

The good performance of these universities contradicted the "mess" that the minister had said that had spread in such universities.  Against this, the Ministry of Education, through the Secretary of Higher Education, Arnaldo Barbosa de Lima Junior, came to the public to affirm that the cut of 30% would reach "in an isonomic way for all public universities."

However, criticism of the government has grown as measures announced by the Ministry of Education have been seen as a kind of persecution of a far-right government for spaces and institutions that produce critical thinking. To try to lessen the criticism, Weintraub tried to convince students and academics that blockade would be only 3.5%. This statement was made in a Facebook Live in the profile of President Jair Bolsonaro.

These muddled decisions led the Bolsonaro administration to face today's first national strike. Thousands of people took to the streets of dozens of Brazilian cities to demonstrate against cuts in education.

The errors in the Brazilian GDP growth forecasts

In the first five months of 2019, market economists have changed their projections for Brazilian GDP growth by 11 times. Their mistake was brutal: they predicted GDP growth by 3% in January 2019, now they have changed to something around 1.45%. These same analysts and economists who do not meet their four months forecast point out that the approval of the Pension Reform will solve all of Brazil's economic problems. Many times, it seems that these analysts use more of the economic terror then rational arguments based on numbers and facts.

Now many of these economists are trying to explain their misguided predictions of recovery. Many of them seem bewildered, with inaccurate explanations of the ever worse results of GDP. This indicates that economists, financial market analysts, and Brazilian businessmen were very naive in their political analysis, and unable to rationally analyze the risk that Bolsonaro's victory could represent for the Brazil economy.

According to the greatest Brazilian historian, Sérgio Buarque de Holanda (1902-1982), Brazil has no conservatives, but "backward people." In his speech, Holland referred to some figures of the Empire who defended slavery in Brazil. Now, the picture repeats itself. Many of these economists, analysts, and business people have championed Bolsonaro's candidacy even though publications such as The Economist and The Financial Times have pointed to the risks that Jair Bolsonaro's victory might represent.

For the political scientist and professor at the Department of Political Science at Unicamp and a researcher at Cebrap, Andréa Freitas, in denying any political coalitions, Bolsonaro set up his own trap. He does not want to negotiate with other political groups.

Added to this there is an undeniable inability of the current government to coordinate the National Congress politically. Besides Bolsonaro does not indicate that he will make an effort to build policies along with other parties, the current president argues that any type of political negotiation is necessarily corrupt. Not sharing power with the other political parties will prevent or make very difficult any measure proposed by the current government.

Another important factor is the party of President Jair Bolsonaro, the PSL. Basically made up of first-time deputies, with no experience in the political game, the PSL is a confusing political party. Many of his deputies are moving in opposite directions in an attempt to secure influential positions in the House of Representatives. Some of these positions are even contrary to government proposals.

IBC-BR falls 0.28% in March 2019 versus February 2019

After retreating 0.98% in February, the Brazilian economy had a new low in March this year. The Central Bank's Economic Activity Index (IBC-Br) retreated 0.28% in March from February, in the seasonally adjusted series, the Brazilian Central Bank said today.

Companies with shares in the Bovespa also presented small results. Guararapes, a clothing retailer, did not perform well in the first quarter of 2019. Only companies such as Copel and Tupy had good results in the first quarter of 2019.

The main problems of the Brazilian economy today

Brazilian investors and the financial market earlier this year were very optimistic with the new government of Jair Bolsonaro. However, over the months that follow, the new Brazilian government has shown signs of not being as liberal as it had promised during the campaign, that the promised Pension Reform faces difficulties to be approved in the National Congress and the macroeconomic scenario is increasingly getting worse.

The huge loss of confidence led the Brazilian economy to continuous reductions in growth forecasts, with a possible slowdown in growth in the first three months of 2019. The second quarter of 2019 also indicates a stagnation. As a result, the country risks falling into recession in 2019.

This picture of large idle capacity within companies and very slow-paced economy should bring down inflation, but that is not what happened. Due to the increase in food prices, the country saw inflation grow and the picture became even more worrying. The slow economic recovery, after the recession that occurred in the governments of Dilma Rousseff and Michel Temer, with rising inflation increases instability.

The truth is that the Brazilian Financial Markets (analysts and economists) and the Brazilian businessmen bet very high on a government that was not able to respond to the height to that bet.

As the country's GDP does not grow, the collection capacity of the Brazilian government has decreased. Because of this, the government will be forced to make cuts in the budget, which follows the projection of GDP. The government is expected to cut about R$ 40 billion in public spending by 2019. To make matters worse, the government will need an additional bill to close the accounts of about R$ 248 billion. By the end of the year, the government will have to negotiate with Congress to approve this amount to close the accounts. However, the political negotiations for the approval of this additional have not even begun.

In order to gain productivity and to compete better with other nations, the current government should be facing structural issues such as Pension Reform, tax reform and also new rules and better management of the public machine. But what we see is a government that is incapable of leading Congress in that direction. The lack of political articulation of the current government prevents these structural reforms from becoming a reality.

BNDES announces a profit of R$ 11.1 billion in the first quarter of 2019

The Brazilian National Economic and Social Development Bank (BNDES) recorded a profit of R$ 11.1 billion in the first quarter of 2019. The result represents an increase of 436.7% compared to the same period of 2018 when profit was R$ 2.1 billion.

Joaquim Levy, the president of BNDES, announced that the state bank will return to the National Treasury R$ 48 billion still in May 2019. This value refers to a part of a loan taken by the bank between 2008 and 2014.

Iedi points to Brazilian GDP growth below 1% in 2019

The Institute for Studies in Industrial Development (Iedi) of Brazil has published an expectation that the Brazilian Gross Domestic Product (GDP) should grow less than 1% in 2019. The industry should perform even worse, with retraction around 2% in 2019.

According to the Iedi Executive Director, Julio Gomes de Almeida, "there is no factor to change" this conjuncture in the short term. For him, the high level of unemployment in the country prevents a stronger growth of economic activity.

Almeida says that even if the Brazilian Central Bank (BC) reduces the Selic rate, which is currently at 6.5% per year, these measures would only show some result in 2020. This, coupled with the low competitiveness of Brazilian industry, our low levels of productivity and the crisis that currently affects Argentina, Brazil's main trading partner in the region, makes the scenario even more worrying.

In the comparison of the first quarter of 2019 with the same period in 2018, the four segments of manufacturing Brazilian industry fell: capital goods industry (-4.3%), durables industry (-3.5%), intermediate processing industry (-2%), and semi-durable industry (-1.4%). The decline of the general industry in Brazil, in turn, was 2.3%.

To make matters worse, the construction sector cut 12,648 jobs in March in Brazil.

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%.

Investments in Brazilian states plummet

According to Valor Econômico newspaper, state investments fell 64% compared to 4 years ago. According to fiscal reports of 23 federal units, investments fell from R$ 2.65 billion in the first two months of 2015 to R$ 934.8 million in the same period of 2019.

In the case of Rio de Janeiro, for example, investments totaled R$ 6.7 billion in 2015 for an expected investment of around R$ 300 million in 2019. This is a very evident example of the terrible economic situation of many Brazilian states. This degree of deterioration in state investments results from the high level of financial imbalance of the state accounts in the last five years.

The projections of economic growth, due to a crisis scenario very similar to last year, point down. Linking investments and business confidence to the approval of the Pension Reform can be a serious misconception since only the Pension Reform is not able to solve all the problems of the country.

There is an undeniable need for the federal government to present some short-term measures to try to minimize the crisis that affects the Brazilian economy.

Disapproval of the Bolsonaro government rises from 20% to 31%

Ipespe Research commissioned by XP Investimentos indicates that the disapproval of the current Brazilian government rose from 20% in January 2019 to 31% in May 2019.

In the same period, according to the same survey, government approval fell from 40% to 35%.

The current government operates under a dynamic of constant conflict, permanently creating enemies, even inside the government itself, and presenting few exits to the economic crisis in which the country finds itself.

The frustration of many voters is directly linked to the feeling that the current president is on a permanent election campaign. As macroeconomic indices such as unemployment, inflation, and industry performance present an increasingly difficult picture, voters want solutions and no longer debates on moral issues.

If the current government does not offer some sort of solution to the crisis affecting the country, the trend is the economic scenario that is bad enough to worsen further. This, in turn, will further weaken the current government.

Brazil: a desert of economic ideas

The current Brazilian economic scenario is catastrophic after years of low economic growth, fiscal uncontrol, and high unemployment rates. The whole contingency of the government that now hits hard federal universities and is sold by the government as a measure to try to cover the gap in the economy conceals, in fact, the lack of economic proposals of the current government for Brazil to leave the crisis frame in which is found.

The government uses the approval of the Pension Reform as the great measure capable of making Brazil grow again. The previous government, of president Michel Temer (who is back to jail in corruption probe), sold the labor reform in the same way. The then Minister of the Economy Henrique Meirelles went so far as to say that the reform would produce 6 million new jobs, but what actually occurred was the rise in unemployment.

Weak macroeconomic data are the result of the lack of proposals by the current government and the orthodox reforms adopted since the arrival of Joaquim Levy to the Brazilian Ministry of Economy during the second Dilma government in late 2014. Levy, now president of the BNDES, initiated a series of orthodox economic measures. Since there should be no Bolsonaro government spending increasing demand and Brazilian entrepreneurs do not seem willing to bet on the Brazilian economy, in the medium term the Brazilian economy should remain weak.

All indications are that in the coming months' recessive adjustments will continue amid the scrapping of Brazil's physical and social infrastructure.