What to expect from Brazil’s GDP numbers

publishes GDP data for Q2 2019 in Brazil. The government expects the results to be somewhere between 0.2 and 0.3%, which would mean that Brazil has (just barely) avoided entering a technical recession.&nbsp;</p> <p><strong>Why it matters.</strong> Between 2104 and 2016, Brazil experienced its worst recession on record (shrinking 8.2%)—followed by its slowest recovery. According to data by think tank Fundação Getulio Vargas, Brazil&#8217;s GDP is BRL 338bn below pre-recession levels—and the cash-strapped government now has no money to foster investments.</p> <div class="flourish-embed" data-src="visualisation/631672"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Problems on both ends.</strong> Brazil finds itself having problems with both supply (the industry&#8217;s idle capacity remains high) and demand (high unemployment rates force families to reduce consumption). The services sector, for example, has lost 43,000 jobs within the past year. Swiss bank UBS has slashed GDP projections for 2019 (from 1 to 0.8%) and 2020 (from 2.2 to 1.5%), citing that pro-business reforms approved since 2016 weren&#8217;t enough to give the economy more dynamism.</p> <p><strong>Silver lining.</strong> Lower interest rates should lead companies to invest. Loans get cheaper, and putting money aside on bonds becomes less attractive.</p> <hr class="wp-block-separator"/> <h2>Brazil asks neighbors for Amazon support</h2> <p>After meeting with Chilean President Sebastian Piñera, Jair Bolsonaro announced a meeting with regional neighbors (except for Venezuela) to discuss Amazon preservation strategies, to be held in Leticia, Colombia, on September 6. The two leaders highlighted that any solution must respect &#8220;national sovereignties.&#8221; The government also announced a decree outlawing all forest fires for 60 days.</p> <p><strong>Why it matters.</strong> Brazil has faced enormous international pressure in recent weeks, due to a spike in Amazon fires. Several European countries have threatened to oppose the Mercosur-EU trade deal (Germany now being among them) if Brazil does not meet its environmental commitments. Yesterday, an association of leather producers said brands such as Timberland, Vans, and The North Face had suspended imports from Brazil, but later backtracked on their comments.</p> <p><strong>Skepticism. </strong>The Bolsonaro administration has been highly cynical of foreign interests—saying they are motivated by desires to control the rainforest region. President Bolsonaro even said the country&#8217;s control over its own territory had “no price, not even USD 20tr,” a reference to an offer of USD 20m in aid from G7 countries, dismissed as an attempt to buy out Brazil. As political scientist Guilherme Casarões wrote on <strong>The Brazilian Report</strong>, <a href="https://brazilian.report/power/2019/08/27/brazil-believes-world-wants-steal-amazon/">fears of a foreign invasion in the Amazon</a> trace back to the 17th century in Brazil.</p> <p><strong>Data.</strong> Between 1985 and 2018, Brazil lost 89m hectares of its forest coverage—an area 20 times bigger than Rio de Janeiro. Meanwhile, land for pastures increased 86m hectares.</p> <hr class="wp-block-separator"/> <h2>Brazil remains highly concentrated along the coast</h2> <p>Official data shows that the Brazilian population is becoming increasingly concentrated in big cities. Of the country&#8217;s over 5,500 municipalities, only 48 have over 500,000 inhabitants, and these are home to 66.5 million Brazilians.</p> <hr class="wp-block-separator"/> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/08/ooooo.png" alt="brazil population" class="wp-image-23106" srcset="https://brazilian.report/wp-content/uploads/2019/08/ooooo.png 764w, https://brazilian.report/wp-content/uploads/2019/08/ooooo-258x300.png 258w, https://brazilian.report/wp-content/uploads/2019/08/ooooo-610x710.png 610w" sizes="(max-width: 764px) 100vw, 764px" /></figure> <hr class="wp-block-separator"/> <p><strong>Why it matters.</strong> Brazil already has staggering levels of inequality between its cities—which is reflected by disparities in investments for infrastructure, business stimulus, and allocations of the State and Municipal Funds (money that the federal administration transfers to states and cities). Demographic trends suggest this inequality curve could be reduced in the long-term.</p> <p><strong>Not the same pace.</strong> Analyzing the data on state-level, we see that populations in all 27 Brazilian states increased over the last year, but at significantly varied rates. São Paulo remains by far and away the biggest state in Brazil, but saw its population increase only 0.83 percent since 2018 to a total of 45.9 million. Meanwhile, states in the North saw their smaller populations grow at a much faster rate—as was the case with Roraima, which jumped 5%.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Argentina.</strong> The Argentinian government will delay USD 7bn of short-term debt payments and will seek a &#8220;<a href="https://www.bloomberg.com/news/articles/2019-08-28/argentina-seeks-to-extend-debt-maturities-as-reserves-tumble">voluntary reprofiling</a>&#8221; of USD 50bn of longer-term debt—signs that a moratory may be on the horizon. The country will also seek to renegotiate its USD 44bn debt with the IMF. Economists, however, say that this newest Argentinian crisis should only have minimum effects on Brazil.</p> <p><strong>Guess who&#8217;s back? </strong>Former Environment Minister and three-time presidential candidate Marina Silva has been accused of only appearing during election seasons. But the crisis triggered by the spike in Amazon fires has put her back into the limelight, as one of Brazil&#8217;s leading environmentalists. However, it remains too early to tell if this resurgence is enough to revive her political career (she got only 1% of votes in 2018—faring worse than Cabo Daciolo, a former firefighter who ran as a joke candidate).</p> <p><strong>Cannabis.</strong> Getting the green light from Brazilian courts to plant medicinal marijuana is a tough ordeal—only 17 people have gotten authorization so far. And importing foreign products is sometimes only a possibility for wealthier families. But a Brazilian judge offered an alternative, authorizing industrial hemp. This strain of the <em>Cannabis sativa</em> plant has lower concentrations of THC and higher concentrations of cannabidiol (CBD), which almost eliminates psychoactive effects.</p> <p><strong>Health scare. </strong>Environment Minister Ricardo Salles was admitted to a hospital in Brasília on Tuesday night after &#8220;feeling unwell.&#8221; A right-wing website close to the administration reported that Mr. Salles suffered a minor heart attack—which wasn&#8217;t confirmed by the government. The minister was released 24 hours later, stating he was under &#8220;environmental stress,&#8221; with a recommendation to rest for the next five days.&nbsp;