Synthesis of the Brazilian Economy
As the war caused by Russia’s invasion of Ukraine enters its fifth month, there are still no signs of a negotiated solution. Interests and relations of dependence consolidated in recent decades are feeding the conflict, provoking huge humanitarian and economic damages, besides the ever-present risk of escalation. The West is calibrating the sanctions so as not to trigger Putin’s ire, while pressuring him to engage in negotiations. In turn, Putin, who has been experiencing bitter diplomatic setbacks, continues betting on a fracture among the nations supporting Ukraine, especially due to the increase of energy and food prices. Against this backdrop, with Brazil’s elections only three months away, the Bolsonaro administration is using the effects of the war as a pretext to open the public coffers further, based on a supposed “state of emergency” that will last until year-end, while the economic activity is reacting to the fiscal stimuli already granted, unemployment is falling, and the Central Bank has been using its only weapon – the interest rate – to counteract high and persistent inflation. The conflict between fiscal and monetary policy is set to grow in the coming months.
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