Good morning! Disappointing GDP results put paid to Paulo Guedes’ V-shaped recovery prediction. Brazil hopes to arrive at COP26 with new carbon laws. Payroll tax exemptions become the latest budget dispute.
A weak Q2 GDP, and more disappointment to come
The Brazilian economy stagnated during Q2, with a paltry GDP growth rate of -0.1 percent from the previous quarter. The frustrating results came despite a bounceback in sectors such as services, construction, and retail — a statement that the country has improved its ability to adapt to pandemic-related restrictions.
- The agribusiness sector, falling 2.8 percent, pulled the overall result down. Producers were hit by adverse climate conditions (droughts and frosts) and crops delivered results below expectations.
- Estimates from official statistics agency IBGE reduced annual estimates for corn, coffee, and cotton crops by 11.3, 21, and 16.6 percent, respectively.
Why it matters. Back in June, Economy Minister Paulo Guedes said Brazil was seeing a V-shaped recovery. However, results are beginning to look more like an A, with steep GDP growth followed by rapid deceleration.
Risks. The GDP is not expected to grow much in the near future, given the looming energy crisis as well as continued political instability. Moreover, rampant...