Agreement between Mercosur and the European Union should be signed in July

According to O Globo newspaper, the expected free trade agreement between Mercosur and the European Union should be signed in July this year. The main technical points have already been closed and pending discussions include rules on drug patents and the release for the entry of European wines. Brazil would have signaled an opening in the automobile market but faces resistance to expand the advantages in agribusiness.

The Europeans want a greater opening of the Brazilian automobile market. The members of the European Union want to increase their exports in this sector. In return, they promise to consider greater access to products such as ethanol, sugar, meats and other agricultural goods, where Brazil dominates.

Brazil has the 3rd biggest drop in trade among G20 countries, according to the OECD

The total of Brazilian exports and imports in the first quarter of 2019 contracted by US$ 6.9 billion when compared to the previous quarter, according to the Organisation for Economic Co-operation and Development (OECD).

Exports in the first quarter of 2019 were US$ 58.6 billion compared to US$ 62.6 billion in the fourth quarter of 2018. Imports were US$ 42.4 billion, compared to US$ 45.2 billion in the previous quarter.

President of the Brazilian Central Bank announces structural measures to simplify the currency exchange in the country

Roberto Campos Neto, the president of the Central Bank of Brazil, said that the bank will announce, on Wednesday (29.May.2019), a bill to simplify the currency exchange in Brazil.

The idea is to create a 100% convertible currency capable of becoming a reference for the region. According to Campos Neto, there is a lot of demand for accounts in reais (the Brazilian currency) in small countries that do business in Brazil. Brazil has this vocation. If we reach maturity, with controlled inflation, low interest, we will have scope to expand the currency. But for this, it is important to have a convertible currency.

Asked by the site Poder360 if Brazil was headed towards a great depression, Campos Neto replied: "we do not work with this scenario". He thinks that this is unlikely, given the pent-up demand in Brazil. 

However, according to Bloomberg, Brazil's GDP in the first quarter should show a decline in the quarterly comparison. This decline could interrupt the series of eight consecutive quarters of advancement.

Morgan Stanley is interested in acting more in Brazil

Morgan Stanley wants to expand its business in Brazil. To this end, it is eyeing in part the structured loan market – for these transactions, the bank targets loans that can range from $ 50 million to $ 250 million. Another objective of the institution will be to bring products offered by the bank in other countries to Brazil. The strategy will also increase the participation of Brazilians in its offshore platform. Caixa Econômica Federal has also chosen Morgan Stanley as a co-advisor to select his insurance partners.

Morgan Stanley, by assuming the position of insurance partner, will be entitled to sell policies for 20 years to Caixa's 93 million customers in its network of more than 4,000 branches.

Number of formal jobs increases in April in Brazil

According to the General Register of Employed and Unemployed (Caged), the Brazilian labor market has created 129,600 formal jobs and has the best April of the last 6 years. However, before April 2019, unemployment has increased in Brazil and vacancies, when they arise, are mostly for informal, precarious and low-wage occupations.

With more than 66,000 hirings, the services sector was the main driver of this performance in April.

Caged is not research on the job market. It is a record that companies are required to provide every month to the Ministry of Economy. The numbers sent to the government, therefore, contain the total number of hirings and dismissals of Brazilian companies.

However, hiring wages for April 2019 were lower than the salaries paid to those hired in April 2018.

The industry with the greatest difficulty in recovering is the industry, where jobs with better salaries are placed. So far the current government has not presented any measure aimed at job creation. The only government agenda so far has been the Pension Reform.

The dollar value continues to grow in Brazil and end the day at R$ 4.0360

The trading session of the São Paulo Stock Exchange (Bovespa) closed with the dollar rising 0.47%, quoted at R$ 4.0360. In the previous trading session, on May 24, the currency was quoted at R$ 4.0170.

The support of thousands of protesters in various Brazilian cities in favor of Pension Reform and Jair Bolsonaro's government helped to optimize the Brazilian financial market. However, the demonstrations that took place on Sunday, May 26, were smaller than the demonstrations against the cuts made by the current government in the area of education, which occurred on May 15.

Among protesters who took to the streets to defend the government, there were criticisms against the Congress, the political establishment, and specially directed to the president of the Brazilian Chamber of Deputies, Rodrigo Maia (DEM-RJ).

The US political risk consultancy Eurasia evaluates that the actions in defense of Jair Bolsonaro can be positive for the advance of the Pension Reform.

Many analysts believe that this sequence of major anti-government and pro-government demonstrations points to a major political division in the country, which could become more acute if demonstrations continue to grow. The next demonstration against the government is scheduled for May 30.

Brazilian construction sector confidence falls in May

According to the Getulio Vargas Foundation (FGV) reported today, the confidence of the construction sector fell 1.8 points in May compared to April, reaching 80.7 points.

The average price of residential real estate in Brazil rose more than the level of sectoral inflation measured by the National Construction Cost Index (INCC), according to a survey conducted by the Brazilian Chamber of Construction Industry (CBIC).

Despite this scenario of lack of confidence and rising real estate prices, the Brazilian Chamber of Construction Industry (CBIC) believes that sales and launches of residential real estate in the country are expected to grow around 10% to 15% in 2019.

GDP growth projections in Brazil fall for the thirteenth consecutive time

Financial market analysts heard by the Brazilian central bank downgraded by 0.01 percentage point the forecast for Brazil's Gross Domestic Product (GDP) in 2019. According to the Focus Bulletin, released today, May 27, the Brazilian economy should move forward 1.23% in 2019. Last week, the forecast was 1.24%.

The Focus Bulletin is a weekly report released by the Brazilian Central Bank. It indicates the expectations of more than 100 institutions of the Brazilian financial market on various indicators of the Brazilian economy, such as GDP, inflation, exchange rate and Selic (basic interest rate).

Insolvency remains high among Brazilian consumers

Two years ago, Brazilian financial institutions were forced by the Central Bank of the country to reduce the time that left consumers rolling the debt on the credit card. This measure aimed to reduce the level of default among Brazilian consumers.

When this measure was announced by the Brazilian Central Bank, credit card interest in Brazil had the highest cost of the world financial system. The average rate has dropped from an unbelievable range of 500% a year to the current 300%, which is still very high.

Entering this type of debt is a clear indication that the Brazilian consumer still faces many difficulties in paying its debts. The level of defaults in the country in 2019 follows around 35%.

To make matters worse, in 2019, defaults by micro and small companies in Brazil reached a record high. The number of defaulters reached 5.3 million in March 2019, according to Serasa Experian.

According to the International Monetary Fund (IMF), the already slow economic recovery in Brazil is at risk

The International Monetary Fund (IMF) has warned this week of the risks posed by domestic and external shocks to the Brazilian economy. According to the IMF, these shocks can hinder the already slow recovery of the Brazilian economy.

According to the IMF, investments in Brazil "remains subdued, retained by idle capacity and persistent uncertainty about the prospects for fiscal and structural reforms. Weak global growth and recession in Argentina are affecting exports. The growth in 2019 is projected between 1% and 1.5%, with significant risks of decline."

For the IMF, the main risk related to the Brazilian economy is associated with the approval of a Pension Reform that generates a "robust" economy to the public coffers in the long term.

Brazilian company Natura buys Avon Products

Natura, the Brazilian cosmetics manufacturer, sent a statement to the market confirming the purchase of US competitor Avon Products. The business had been speculated a few weeks ago by the market. The operation creates, according to the statement of Natura, "the fourth largest exclusive beauty group in the world". An agreement will be made to exchange shares between the two companies: while Natura will control about 76% of the combined group, the rest will be held by Avon shareholders. Taking into account the values of the closing of the shares the day before, the group is valued at US$ 11 billion (about R$ 44.5 billion).

Now along with Avon, Natura must have annual revenues of over US$ 10 billion and more than 40,000 employees worldwide. 

In recent years Natura has adopted an aggressive policy of expansion. In 2013, the Brazilian company bought Australia's Emeis Holdings, a manufacturer of premium beauty products, which operates under the Aesop brand. In June 2017, Natura announced the purchase of 100% of the Body Shop, which belonged to the French L'Oreal, in operation of about 1 billion euros.