Brazil to lag behind neighbors in Covid economic recovery

. Jan 06, 2021
world bank recovery brazil economy Brazilian workers wait for the bus. Photo: Alf Ribeiro/Shutterstock

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Today, we talk about why Brazil’s recovery will be slower than the rest of the world, according to the World Bank. The race for the Speaker position heats up. And holiday period boosts isolation rates in Brazil

World Bank: Brazil to grow slower than its Latin American peers

In its latest Global Economic Prospects report, the World Bank estimated that the Brazilian economy will bounce back

3 percent — below its forecast for the global economy (4%) and for Latin America (3.7%).</p> <ul><li>These projections, however, are tied to the large-scale rollout of vaccines around the world.</li></ul> <p><strong>What is the World Bank saying?</strong> &#8220;In Brazil, the recovery in private consumption and investment in the second half of 2020 is expected to continue in early 2021, supported by improving confidence and benign credit conditions, pushing growth to 3 percent in 2021. The rebound is expected to be uneven across sectors; industry and agriculture are expanding more rapidly than the services sector due to a lingering risk aversion among consumers affecting travel, tourism, and restaurants, in particular. Momentum is expected to slow as the year proceeds, in part due to the withdrawal of monetary and fiscal stimulus, bringing growth down to 2.5 percent in 2022.&#8221;</p> <p><strong>Red flags.</strong> The World Bank expressed its concerns with the fiscal expansion made by emerging economies —&nbsp;even though massive spending on social transfers helped mitigate the impact of the crisis in Bolivia, Brazil, Chile, Colombia, the Dominican Republic, and Peru.</p> <ul><li>In Brazil, the ballooning of public spending had been an ongoing trend even before the pandemic — jumping from the equivalent of 38.4 of the GDP to 42.7 percent between 2010 and 2019. The pandemic, of course, made matters worse.</li></ul> <figure class="wp-block-image size-large"><img loading="lazy" width="778" height="1024" src="https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates-778x1024.png" alt="world bank estimates" class="wp-image-54622" srcset="https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates-778x1024.png 778w, https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates-228x300.png 228w, https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates-768x1011.png 768w, https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates-600x790.png 600w, https://brazilian.report/wp-content/uploads/2021/01/world-bank-estimates.png 794w" sizes="(max-width: 778px) 100vw, 778px" /><figcaption>Source: World Bank</figcaption></figure> <p><strong>Is Brazil broke?</strong> On Tuesday, President Jair Bolsonaro told supporters that &#8220;Brazil is broke,&#8221; and that he is &#8220;unable to do anything.&#8221; The president was heavily criticized by political analysts and economists alike, as his words could affect citizens&#8217; trust in the Brazilian economy — potentially inducing them not to spend. A recent poll shows that 41 percent of Brazilians already expect economic conditions to worsen. In an economy based on consumption, that would be a danger.</p> <ul><li>The president&#8217;s declaration could also further dissuade foreign investors,&nbsp;who removed BRL 31.8 billion (USD 6 billion) from the Brazilian stock market in 2020. &#8220;The fiscal situation is worrisome, but the president could do many things to remedy the situation,&#8221; says market analyst Marco Harbich, a columnist for <strong>The Brazilian Report</strong>. &#8220;The problem is that he doesn&#8217;t do much.&#8221;</li></ul> <p><strong>In default.</strong> Brazil has failed to pay a USD 292-million commitment to the <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/16/brazil-new-branch-brics-bank-5g-coronavirus/">New Development Bank</a>, also known as the BRICS&#8217; bank. In total, the country has USD 462 billion in debts with multilateral organizations — last year, it nearly skipped a payment to the United Nations which could have cost the country its voting rights at the General Assembly.</p> <hr class="wp-block-separator"/> <h2>House Speaker candidates in campaign mode</h2> <p>Today, the Brazilian Democratic Movement (MDB) party will officially launch the candidacy of Congressman Baleia Rossi for the House Speaker election. He was chosen by incumbent Speaker Rodrigo Maia as his successor, and currently has the nominal support of 11 parties.&nbsp;</p> <ul><li>These 11 parties hold 261 of 513 seats in the House, though it is uncertain whether their entire benches will vote in Mr. Rossi&#8217;s favor. Many of these parties were split on their willingness to support Mr. Rossi&#8217;s candidacy, and the fact that the House Speaker vote is a secret ballot favors dissent.</li></ul> <p><strong>Challenger. </strong>Mr. Rossi will face off against Arthur Lira, leader of the powerful congressional group known as the &#8220;Big Center.&#8221; This federation of conservative, rent-seeking parties has become <a href="https://brazilian.report/power/2020/06/02/jair-bolsonaro-bedfellows-congress-deliver-results-how-long/">ever closer to President Jair Bolsonaro</a>, who has gone all-in with his support for Mr. Lira.</p> <ul><li>The president&#8217;s decision to meddle with the Speaker election is a risky one. By throwing his support behind Arthur Lira, he risks making enemies out of the opposite side, which could either win the election or cause the president important defeats in tight congressional votes. Furthermore, the voting records of both Messrs. Rossi and Lira show that the two lawmakers often vote in accordance with the Bolsonaro administration.&nbsp;</li><li>Mr. Rossi&#8217;s loyalty is even higher — he voted with the government 90 percent of times in 2019 and 78 percent in 2020, against Mr. Lira&#8217;s rate of 86 and 71 percent.</li></ul> <p><strong>Impacts.</strong> The race is currently too close to call, which led Mr. Bolsonaro to postpone a <a href="https://brazilian.report/power/2020/12/09/bolsonaro-tries-to-cement-coalition-with-cabinet-reshuf">cabinet reshuffling intended to cement the alliance between the president and the Big Center</a>, putting Arthur Lira&#8217;s allies in senior positions.</p> <div class="flourish-embed flourish-parliament" data-src="visualisation/4875800"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> The heads of congressional houses hold immense agenda-setting powers. Cooperation with them is always key to the government — but that is especially the case now, as the country needs swift action to recover from the crisis.</p> <hr class="wp-block-separator"/> <h2>Isolation rates in Brazil top 50 percent for the first time since May</h2> <p>Despite scenes of crowded beaches and large New Year&#8217;s Eve celebrations across the country, data from geolocation startup InLoco suggests that Brazilians isolated themselves more during the holiday period. On December 27 and January 3, isolation rates reached 52.3 percent — topping the 50-percent threshold for the first time since May, when many states were still enforcing strict restrictions.</p> <p><strong>Vaccine.</strong> Producers in India retracted a previous statement about a government block on exports, and the Brazilian government confirmed the arrival of 2 million ready-for-use doses of the AstraZeneca vaccine in mid-January. Still, the federal government has yet to zero in on a date for the launch of its inoculation plan.</p> <p><strong>Meanwhile … </strong>São Paulo authorities say a request for the emergency use of the Chinese-made CoronaVac could come as early as tomorrow — but the state has already missed previous deadlines. Governor João Doria will meet with the state&#8217;s 645 mayors to present his vaccination plan, scheduled to begin on January 25.&nbsp;</p> <ul><li>According to newspaper Folha de S.Paulo, vaccines will be administered at 5,000 locations across the state — 3,000 of them in Greater São Paulo, home to some 50 million people.</li><li>Recent statements from President Jair Bolsonaro suggest that his administration could politically interfere with health regulators — which has led Mr. Doria&#8217;s allies to advise against declaring overly optimistic timetables for vaccination.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>5G. </strong>The lower house has created a working group to prepare an opinion on how Brazil should proceed with the upcoming auction of 5G frequencies — especially regarding a <a href="https://brazilian.report/power/2020/12/02/shunned-by-bolsonaro-huawei-has-friends-in-brazils-congress/">potential ban on Chinese telecom firm Huawei</a>. Lawmakers have promised an &#8220;ideology-free document in line with national interests,&#8221; and will meet several telecom companies before publishing their recommendations. The Brazilian government has hinted that a <a href="https://brazilian.report/newsletters/brazil-daily/2020/11/11/in-one-day-bolsonaro-hits-out-at-both-china-and-biden/">Huawei ban is a real possibility</a>, but President Jair Bolsonaro has <a href="https://brazilian.report/newsletters/brazil-daily/2020/11/24/5g-could-brazil-jair-bolsonaro-flip-flop-on-huawei/">not openly discussed</a> what his decision will be. </li><li><strong>Auto industry. </strong>While <a href="https://brazilian.report/business/2019/03/29/brazil-auto-industry-subsidies/">multiple automakers have closed</a> factories in Brazil (such as Ford and Mercedes-Benz) or announced imminent shutdowns, General Motors has disclosed plans to resume investments previously frozen due to the pandemic. The manufacturer, which leads the Brazilian car market with a 17.3-percent market share, is set to invest BRL 10 billion until 2024.</li><li><strong>ESG.</strong> The São Paulo Stock Exchange has published its new Carbon Efficiency Index (ICO2B3), including 58 companies from 22 sectors whose actions are considered to be in line with sustainability principles. Together, these companies represent two-thirds of all stocks traded in Brazil. The ICO2B3 index includes meat giant JBS, which has recently pledged to implement a sustainable agenda, despite its <a href="https://brazilian.report/environment/2020/09/05/meat-giant-jbs-once-again-linked-to-deforestation-in-brazil/">supply chain being linked to deforestation and slave labor</a>.</li><li><strong>E-commerce.</strong> AliExpress — the online retail giant owned by the Alibaba Group — is set to open up its marketplace to Brazilian vendors. The company reportedly has yet to establish a deadline for the move, but it could happen before the end of Q1 2021. Vendors will be selected based on their growth and storage capacities. The Alibaba Group is in a moment of uncertainty, <a href="https://www.theguardian.com/business/2020/dec/24/china-targets-alibaba-with-anti-monopoly-investigation">being targeted by the Chinese government with an antitrust investigation</a> and rumors about the disappearance of founder Jack Ma following spats with the country&#8217;s leadership.</li><li><strong>Lula.</strong> A trial on whether former Federal Judge Sérgio Moro was <a href="https://brazilian.report/power/2020/08/05/with-some-delay-lula-gets-win-sergio-moro-car-wash-case/">biased when convicting former President Luiz Inácio Lula da Silva</a> for corruption in 2017 could be put on the Supreme Court trial docket in the coming weeks. The conviction was confirmed by a court of appeals, removing Lula from the 2018 election and, eventually, leading to his imprisonment. But in 2019, <a href="https://brazilian.report/podcast/2019/06/12/intercept-car-wash-leaks-moro/">leaks of private messages between the judge and the case&#8217;s prosecutors</a> raised questions about Mr. Moro&#8217;s impartiality.

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