Brazilian GDP falls 0.2% in the first quarter of 2019

According to information published today (30.May.2019) by the Brazilian Institute of Geography and Statistics (IBGE), the GDP (Gross Domestic Product) in Brazil fell by 0.2% in the first quarter of 2019 in relation to the previous three months.

This is the first negative result of the Brazilian GDP since 2016. The figures released by the IBGE point to the risk of Brazil again suffering from the recession (when the country registers two consecutive quarters of decline in economic activity).

According to the IBGE, the rupture of the Vale dam in Brumadinho (MG), and its consequent effect on the result of the industry is among the main factors that brought down the economic activity of the country.

This landslide of Brumadinho dam of Vale occurred on January 25. 244 people died. The tragedy was a direct result of the lack of public oversight and the policy of easing environmental licensing laws, which is widely advocated by the current government of Jair Bolsonaro and his Environment Minister Ricardo Salles.

Among other things, Salles favors "self-certification." This means that the company itself will inspect its dams without the need for any prior environmental inspection by the government agencies for certain types of projects. According to Exame magazine, "not even the worst socio-environmental tragedy in Brazil, provoked by Vale in Minas Gerais, made the minister change his mind."

Now, with the possibility of a new tragedy in the Upper South dam of the Gongo Soco Mine, in Barão de Cocais, Minas Gerais, which can break at any moment, it puts the lives of the region's inhabitants at risk, it can cause another immense disaster environmental and make the Brazilian economic situation even worse.

Brazil suffers from banking concentration

Brazil has one of the highest banking concentration rates in the world. According to the Bank Economics Report of 2017, published by the Central Bank of Brazil (BCB), the five largest Brazilian banks account for 82% of the country's financial market assets. In 2006, this rate was 60%. It is what says the memo Revolução Bancária (Banking Revolution) written by Diego Gazotto December.

The Central Bank of Brazil pointed out in its Banking Economy Report that the banking concentration in the country had a slight decline in 2018, with the five largest institutions (Banco do Brasil, Itaú, Bradesco, Caixa Econômica and Santander) holding 81.2% of the assets total of the commercial banking segment, compared to 82.6% in 2017. The report also points out that this group accounted for 84.8% of credit operations in the segment, against 85.8% last year. In relation to total deposits, the fall from 85% in 2017 to 83.8% in 2018. Although all numbers have decreased, these levels of concentration are still very high.

Information from the Central Bank of Brazil also shows that, in March 2019 (last available data), interest on overdraft and credit card rose again. In the case of an overdraft, the rate was 317.9% per year in February, to 322.7% per year in March. Credit card interest rates went from 295.5% per year in February to 299.5% per year in March. They are unacceptable rates.

According to the economist Maurício Gutemberg, "Nowhere in Latin America is there an interest rate charged by credit card companies such as the Brazilian one. We can not call it interest rates here. In fact, they are rates comparable only to moneylenders but charged by banks and financial companies regulated by the Central Bank of Brazil. "

Meeting of the leaders of the three powers (executive, legislative and judicial) please the Brazilian financial market and helps to slow the dollar's rise

Today was a good day for the Brazilian financial market. Some facts pushed the Ibovespa positively.

Rodrigo Maia, the president of the Chamber of Deputies, asked Samuel Moreira, the rapporteur for the Pension Reform in Congress, to present the text of the Pension Reform proposal until June 15.
Maia wants the MPs to vote for the approval or not of the Pension Reform in the first half of 2019.

In addition, the meeting between representatives of the three Brazilian powers that took place today encouraged Brazilian investors. The representatives of the three powers have signed a pact with targets and actions for the resumption of growth in the country. The meeting was attended by President Jair Bolsonaro and the presidents of the Chamber of Deputies, Rodrigo Maia, the Senate, Davi Alcolumbre, and the Supreme Court, Dias Toffoli.

I already wrote here in this blog 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".

Now the leaders of the three powers have begun to present a beginning of political negotiation. But some political analysts believe it may already be too late for that. There are many MPs uncomfortable with the constant attacks made by Bolsonaro, his political sons and his followers on social networks.

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).