Brazil’s recession is over, but the crisis is not

A year out from obtaining his bachelor’s degree in engineering, Eduardo Intrieri still hadn’t found a job. No concrete opportunities lay ahead of him, and by April 2017, he was more than worried.

In a desperate attempt to find employment, he decided to add as many people on LinkedIn as he could. An e-mail with his CV would always follow. The 10,495 contacts he currently has on the platform are the result of over 100 daily requests carried out month after month.

By then, his routine was surgical: wake up, have breakfast, turn on the computer. The “add connection, send e-mail” cycle would go on until 5 p.m. “It was like a job for me. For 40 hours a week I was doing that,” he describes. The 24-year-old would receive no more than two or three replies – per week. But even those would almost always be a demonstration of support. Not a single job offer materialized.

Eduardo was not alone. In March 2017, unemployment in Brazil hit a record high of 13.7 percent, affecting 14 million people. The lack of jobs was a consequence of one of the worst recessions in Brazilian history. Inflation skyrocketed to 10.6 percent in 2015. The country’s GDP shrank by 3.5 percent in 2015 and 3.5 percent in 2016. Investments collapsed.

Relief came in 2017 when the economy grew 1 percent: consumer prices accelerated by 2.9 percent, and the unemployment rate began to fall. The recession is now officially over. Economists currently forecast a GDP growth around 3 percent in each of the next two years, according to a weekly market readout released by Brazil’s Central Bank.

But it is naïve to believe that the country is back on track and that the economic recovery will soon hit full force. The impacts of the economic depression that lasted for 11 quarters will not simply vanish and make way for prosperity. Celebrating short-term growth and higher employment is reasonable – but will it last? The fact is that Brazilian economic recovery is not guaranteed. But why is that?

The answer is a chain of interconnected political and economic factors that play a key role in economic growth. The Brazilian Report will unpack them in two stories. They concern uncertainties regarding the presidential elections, the already-low level of investments and how these affect job creation, workers’ income and their willingness to consume. In this first piece, we address the discouraging scenario for investments in the country.

“Mayday, Mayday! We lost an engine”

Brazil’s economy was faring well for awhile. The country managed to avoid the turbulence caused by the 2008 financial crisis, and its GDP fell only 0.1 percent in 2009, whereas the world economy dipped 1.7 percent.

The maneuver, however, would prove...