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COUNTRY INSIGHTS

The Decision of the COPOM
BRAZIL ECONOMICS · Report · 08 May 2023

At the last COPOM meeting, the SELIC rate was kept at 13.75%. With a serene tone and clear technical support, the Central Bank’s communiqué stated clearly there was no outlook for the foreseeable future to start an easing cycle. Besides the conflict between restrictive monetary policy and expansi...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 02 May 2023

Below we describe how the government is losing support both in Brazil and abroad, and the aggravation of the fiscal-monetary conflict, culminating in slower growth and prolongation of high interest rates and inflation. Without a master plan to define his third mandate able to identify bearings...

The Fiscal Framework Proposal
BRAZIL ECONOMICS · Report · 24 Apr 2023

The fiscal framework bill sent to Congress confirms what we already knew: the only guarantee is higher spending in real terms, growing within an interval of 0.6% to 2.5% a year. The text does not contain any punishments for failing to meet the primary surplus targets, which are mere indications. ...

Caution Is in Order Regarding Cutting the Interest Rate
BRAZIL ECONOMICS · Report · 17 Apr 2023

Last week, bets grew about an early start of the monetary easing cycle, before the end of the second quarter. The optimism was not due to the quality of the fiscal framework announced by the government, but rather to the deceleration of the 12-month rate of the IPCA to 4.6% (5.6% a month ago). In...

A Framework That Falls Short of Resolving the Fiscal Problem
BRAZIL ECONOMICS · Report · 10 Apr 2023

Given the need to reduce the public debt, the only fiscal framework that makes sense is one that assures reaching of sufficiently high primary surpluses to achieve that goal. Unfortunately, the government’s proposal fails in this task. The arithmetic of the new framework seems impeccable. After a...

LatAm Webinar Replay: Reforms Galore - Brazil, Chile, Colombia, Mexico
BRAZIL ECONOMICS · Report · 06 Apr 2023

Visit our calendar page to watch the replay of our webinar featuring Affonso Pastore, Robert Funk, Juan Carlos Echeverry and Mauricio Gonzalez discussing how proposed reforms to pension systems, fiscal rules, and tax policies are likely to impact Latin America's largest markets in an event moder...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 03 Apr 2023

Below we examine the political contradictions of the government and some details and implications of the new fiscal framework. A feeling of perplexity has crystallized about the behavior of President Lula and the paralysis of his government during its first three months, the “honeymoon” period...

The War Against the Central Bank
BRAZIL ECONOMICS · Report · 27 Mar 2023

The Central Bank, aware of the need to keep monetary policy in restrictive territory, kept the SELIC rate at 13.75% at the last COPOM meeting, and stated that it will not hesitate to increase the rate if necessary. A level-headed analysis of the projections clearly shows that if the monetary auth...

COPOM, FOMC and ECB: Central Banks Carrying Out Their Mandates
BRAZIL ECONOMICS · Report · 20 Mar 2023

Robert Mundell, who won a Nobel Prize for Economics in 1999, expressed the “principle of effective market classification”, advocating the use of each economic policy instrument in pursuit of the objective with the greatest efficiency. The instrument that has a “comparative advantage” to stanch a ...

Navigating with Instruments in a Dense Fog
BRAZIL ECONOMICS · Forecast · 13 Mar 2023

When the government’s economic team is specialized in sending noise instead of signals generated by a good diagnosis, good results cannot be expected. For 2023, we expect GDP growth of 1%, a major deceleration with regard to the result in 2022, of 2.9%. This expansion will only be attained due to...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 06 Mar 2023

Just In the few weeks since assuming office, the new government has been repeating the imprudent pattern of confronting the limits imposed on its power by the established rules, as is typical of autocracies of the right or left. Unlike Bolsonaro, who left decisions on economic questions largely i...

The Deceleration of GDP And the Possible Reaction of the Government
BRAZIL ECONOMICS · Report · 06 Mar 2023

If the decline of GDP in the fourth quarter of 2022 had been a fleeting event, followed by recovery, there would be no worry about the government’s reaction. But this was not a temporary deceleration, but rather a persistent one. Despite the expansionary fiscal policy, monetary policy has been in...

The Cost of Reducing Inflation
BRAZIL ECONOMICS · Report · 27 Feb 2023

It is becoming increasingly clear that the process of reducing inflation in the world will be long and costly, with risks of recession in the United States and Brazil. In the USA, the latest data indicate that the 12-month rate of the Personal Consumption Expenditures Price Index (PCE) has starte...

External Accounts – The Bright Spot of the Brazilian Economy
BRAZIL ECONOMICS · Report · 23 Feb 2023

The environment is fraught with uncertainties, but in these turbulent waters, the outlook for the external account remains favorable. Although in 2022 the country’s balance of payments was in the red by US$ 7.3 billion (versus a surplus of US$ 14 billion in 2021), the trade balance was positive a...

Populism, Inflation Target and Expectations
BRAZIL ECONOMICS · Report · 13 Feb 2023

With high inflation and clear evidence of slowing growth – which is nothing more than the cost paid to reduce inflation – President Lula has opened a campaign to increase the inflation target. With a discourse typical of a left-wing populist, he is accusing the Central Bank of protecting the elit...

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