How Brazil’s economy can bounce back after the pandemic

The Covid-19 pandemic has thrown the world into a deep recession, the true extent of which remains to be seen. For Brazil, experts project economic depression, perhaps the worst on record, with a complex path toward recovery. Brazil is facing a job crisis, with massive underutilization of the labor force and a rising number of informal workers — who earn less money and enjoy fewer (if any) protections and benefits. Meanwhile, Brazil’s public debt — currently over 80 percent of GDP — will hamper the government’s ability to throw money at the crisis as a way to recover the economy.

The Central Bank forecasts a 6.4-percent fall in Brazilian GDP for the year, which almost seems positive compared to the U.S.’s 32.9-percent contraction in 2020’s second quarter.

Yet, not all is lost, as much of the country’s economic recovery can still be shaped by the government’s planning moving forward.

According to the federal government’s Institute of Applied Economic Research (Ipea), implementing the right recovery policies could see Brazil almost double its projected GDP growth over the next 10 years, going from the current mid-pandemic projection of 25.1 percent to a 42.5 percent increase by 2030.

This “transformative” scenario, as Ipea labels it, would not only fast track economic growth but also overtake the slow pre-pandemic growth trajectory observed in 2019.

If Brazil somehow manages to control the Covid-19 pandemic – and that’s a big “if” given the increasing likelihood of a second wave of cases that would worsen Brazil’s economic crisis — here’s how an effective economic recovery could take place.

Protecting small and medium businesses

Small and medium enterprises (SMEs) make up over 95 percent of Brazilian businesses and are responsible for the creation of about 60 percent of all formal jobs in Brazil, according to Sebrae. Their survival is of vital importance to maintain the current market infrastructure and prevent worsening Brazil’s economic crisis even further due to a business shortage.

As of early July, at least 716,400 companies shut...