Economic reforms in Brazil
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Brazil’s economic growth after the epidemic threatens to decline next year as economists warn of rising prices and interest rates and unprecedented drought.
Encouraged by the principles that led to the reopening of businesses during the Covid-19 crisis, much of Latin America’s economy returned to epidemics before the first half of 2021 and appears to be declining year by year by more than 5% per year.
Most of the second quarter – which is due to be released on Wednesday morning – is expected to show that the economy has grown 0.1% from the previous quarter and 12.7% since the same period last year.
The sentiment for next year, however, is gaining momentum, as experts begin to revise the estimates of annual growth to between 1 and 2%. In addition to rising prices and interest rates, many fear political instability in the run-up to next year’s presidential election. There are also concerns that the government may jeopardize its investment in new funding.
Going forward, the economy will suffer from three scams. The first is inflation. It will disrupt consumer purchases. The second is the effects of inflation – the central bank is now rushing to deal with it [interest rate increases]. In order to combat inflation, we need to hurt the economy, “said Marcelo Fonseca, chief financial officer at Opportunity Total.
“Third is the uncertainty. The financial system is in jeopardy and I don’t think the mood has changed during the election. There will be a lot of turmoil, which is why the economic downturn, which has led to money laundering, is inevitable. ”
The sharp rise has plagued many Latin American countries and their sudden return this year in Brazil has upset policymakers, who are now rushing to price controls.
In the 12 months to July, inflation stood at 8.99%, above the 2021 target of 3.75%. In response, the central bank raised its mark Selic interest rate from time to time low by 2 percent up to 5.25 percent. It is expected that the market will reach 7.5% by the end of the year. This could extend to the economy as well.
Adding to this picture, the unemployment rate is more than 14% higher, meaning that utility rates are staggering.
“Inflation is already in place this year – the current effort is to improve next year,” said André Braz, an economist at the Brazilian Institute of Economics.
“Brazil is a very unequal country and inflation for the poor is higher than for the rich because the poor spend more money on food – and the price of food is higher than in other groups,” he added.
Along with food, the cost of electricity has also gone up because the worst drought in nearly 100 years has wreaked havoc.
Brazil relies on the power of the electric motors of the electric motors.
“We’ve never seen a drought like this – it looks like I’m being tested. I urge you home now: turn off the lights. In this way it will help save energy and water in hydroelectric dams, “President Jair Bolsonaro said last week.
Fonseca at Opportunity Total added: “To address power distribution or frequent power outages, the point is that this is a major risk factor for growth in the next room.”
Economists are also at the forefront of next year’s presidential election, which threatens to destabilize the country. Walking to the polls, Bolsonaro in recent weeks it has criticized democratic institutions in Brazil, stepping up its conspiracy and reinstating foreign exporters in a growing market.
“The political crisis has become a major concern. So far we have been ignoring you as part of [show]. But this is not a child’s play. It may mean bad things, ”said Paul Bilyk, chief executive of Rio Bravo Investmentos.
Analysts also fear the government may abandon its financial commitment before the election in order to win votes and money.
About 84% of gross domestic product, Brazil’s government debt is still high in the developed economy.
Advertisers to this day remain cautious about the risks, especially because of the permissiveness of the money that the government spends in line with inflation. If the hat is left, however, many predict the exit from the Brazilian economy and the economic downturn.
“The financial sector is struggling to find a solution to the economic and political crisis. As we approach elections, the risk is that politics will win, “said Viktor Szabo, director at Aberdeen Standard Investments.
“Brazil can easily get back on its debt. It has a very long debt and a temporary maturity – you do not want to be confused by such things. Debt can explode. ”