Coronavirus

Bleak economic perspectives for “post-Covid-19” Brazil

Economists are critical of the government's delayed reaction to the Covid-19 crisis, and predict tough economic times ahead

Bleak economic perspectives for "post-Covid-19" Brazil
Supermarket in Porto Alegre. Photo: Thiago B. Trevisan/Shutterstock

A poorer, more unequal Brazil is set to emerge from the Covid-19 pandemic, according to economists from think tank Fundação Getulio Vargas. However, the extent and duration of the economic chaos, they say, depends on how fast and effectively Brazilian authorities will act to save jobs and avoid massive bankruptcies

While economic measures such as income transfer policies, credit lines for companies, and the liquidity provided by the Central Bank were praised as a comprehensive approach to tackle the crisis, professors have echoed the criticism expressed by high-level authorities such as House Speaker Rodrigo Maia due to the delay in implementing measures already approved by Congress. 

“Economic measures happened too slowly because the Economy Ministry doesn’t share the same vision as the Health Ministry. They support [a reduced approach to] isolation measures and are hoping to spend less, but this isn’t happening, because health experts recommend that people stay isolated. The lack of coordination increases the uncertainties and the outlook for recession in Brazil,” said professor Marcio Holland, who is also former Brazil’s Secretary of Economic Policy. 

According to the Ministry of the Economy, measures already taken amount to BRL 750 billion, or nearly 10 percent of 2019’s GDP, according to IBGE. Moreover, liquidity measures applied by the Central Bank released another BRL 1.2 trillion into the economy. For professor André Portela, the challenge now is not necessarily guaranteeing more resources, but how to design a system that ensures the funds will reach those who need it the most.   

“We are a bit late, but we are waking up to the necessity of a set of actions, providing working capital for companies, keeping jobs, and transferring income. The point now is whether it will reach those who need it and on a large enough scale,” he said.

On April 7, state-owned bank Caixa...

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