Back in February, I wrote in an op-ed that the economy would provide an electoral lifeline to President Jair Bolsonaro. And since then, data on economic activity has largely brought positive surprises.
According to Brazil’s official statistics agency, the number of employed Brazilians surpassed the pre-pandemic level in Q2, roughly one year before most economists had predicted. Brazil’s GDP, meanwhile, is set to grow by 2 percent in 2022, more than double the rate I had forecasted at the beginning of this year.
However, the matter of inflation has remained a major obstacle in Mr. Bolsonaro’s quest for popularity gains, especially after the surge in oil prices that followed the war in Ukraine. In response, the president launched the so-called “Desperation Bill,” a constitutional amendment creating yet another exception to public spending rules and allowing for a major boost in cash transfers to poor households.
In parallel, other bills forced states to massively cut taxes on fuel — leading gas prices at the pump to plunge by about 15 percent — and authorized tax rebates...
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