Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 03 Apr 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

Temer tested the thin ice on which his government rests and nearly provoked a disaster by excluding state and municipal governments from the social security reform proposal. Perhaps to avoid, with the complacency of governors, state civil servants from protesting in the visitors’ galleries of Congress, he excluded subnational civil servants from the proposal, saying this was a task for the respective state and municipal governments. This obviously displeased those supporting the arduous task of implementing reforms that can put the country back on the path to growth. After all, if one exception can be made, why not others? Fortunately, faced with the reaction of the economic team, he quickly backtracked, avoiding jeopardizing the economic victories obtained so far. On the positive side, signals are accumulating that the recession is ending, but also that the recovery will be very slow. The faster decline of inflation, and consequently of the interest rate, than expected a few months ago augurs well for a more robust recovery next year, when the economy’s performance will be fundamental to determine the risks that will underpin the presidential campaign.

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