Synthesis of the Brazilian economy

BRAZIL ECONOMICS - Report 15 Feb 2018 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The unanimous confirmation of Lula’s conviction by the TRF-4 court, with increase of his prison sentence, has made the probability of his appearance on the ballot in October remote. This development has focused attention on the center of the political spectrum, and negotiations are ongoing to form alliances and accords to support names with greater chance of victory. Inflation and interest rates continue to be low, and economic growth is gaining traction, helped by the increase of exports and consumption and the incipient reaction of investments. But uncertainties and worries remain about the fiscal situation, where the non-recurring deficit has been hovering around 3% of GDP, while stabilization of the debt/GDP ratio would require a surplus of around 2%. The difficulties also continue to be enormous for approval of the pension reform proposal, and the recent signs of disquiet in the international scene appear to indicate the start of a phase of lower leniency of investors regarding the country’s imbalances.

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