Falling public investments threaten Brazil’s economic recovery

When Brazil officially left its longest-ever recession last June, President Michel Temer gleefully tweeted, “The recession’s done!” His then-Minister for Finance Henrique Meirelles joined in on the celebratory antics, calling it a “historic day”. Yet financial markets remained skeptical, with the government’s international credit ratings wobbling dubiously between stable and junk ratings.

Economic growth has since remained slight, but economists say that one key area likely to hinder Brazil’s long-term recovery is the country’s continually plummeting rate of public investments. Economists are now fearful that the strategy could hinder the return of foreign investments to Brazil and damage the country’s overall recovery.

The government has been continuously reducing public investments since 2014, a strategy that economists and ministers alike agreed was necessary. But the NGO Contas Abertas, which tracks government expenditure, is concerned that its impact may...