Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 07 Apr 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

OVERVIEW

ROUGH SEAS DEMAND A GOOD CAPTAIN

The seismic effects triggered by Trump’s actions will still cause considerable damage until a new equilibrium can be reached. From tariffs calculated “on the back of the envelope” to the systematic assault on democratic institutions, the country is putting at risk its privilege of being the safe haven the world has come to rely on.

In this context, although the impacts will not be homogeneous, no country is immune to internal jolts, requiring balanced and courageous responses that depend on the capacity and leadership of their rulers. Brazil is feeling the shock while under the leadership of a weak and unpopular government, and having lost the prominent role it once held on the international stage, despite its strengths and opportunities. Public expressions of support for Venezuela, Hamas, Putin, and other autocrats have distanced Lula from the Western centers of power.

As described below, the fundamentals of the Brazilian economy have been deteriorating sharply, with a rapid increase in public debt (13 percentage points during Lula’s third term), a loss of quality and effectiveness in fiscal policy, now geared toward keeping activity heated even while operating above its potential.

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