Georges Sadala Rihan - NICE ENTREPRENEUR
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Georges Sadala Rihan

Uncertainties threaten recovery of Brazilian economy in 2017

By Deutsche Welle – posted 04/01/2017 05:04
Temer government crisis, turmoil caused by the Lava Jet and until the beginning of the Trump era generate doubts between investors and companies

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In 2016, the bad news about the Brazilian economy was not enough. Along with the political crisis, the economic turmoil has not caused, among several negative numbers, a recession and an increase in unemployment. But despite the country’s recovery expectations are better than in the past, the beginning of 2017 does not signal the end of the crisis.

According to the Focus Bulletin – a weekly survey of financial institutions and economists by the Central Bank – released on Monday 2, the Gross Domestic Product (GDP) is expected to close 2016 with a retraction of 3.49%. By 2017, it is expected to be 0.5% higher – thus signaling a slow recovery in the economy.

“Families, companies and governments have taken a lot of debt in recent years and are currently undergoing an adjustment phase,” says economist Silvio Campos of Tendências Consultoria. “Consumption will continue to be lower because of household indebtedness and high unemployment, the government does not have fiscal space to increase spending, and companies are also in a very delicate situation, which suggests a slow recovery of investment too.”

The political crisis was one of the main reasons for the economic turbulence in 2016. However, many market players and experts believed that with the impeachment of former President Dilma Rousseff and the start of President Michel Temer’s management, international investors would win faster The confidence to invest in the country. But for analysts, the current political crisis experienced by Temer neutralizes this effect.

“The political scenario is very complicated, among other reasons, due to Odebrecht’s actions in Operation Lava Jato and the chances that the High Electoral Court will vote for the cancellation of the Dilma-Temer plate,” says João Luiz Mascolo, professor of economics at Insper . “And there is also the question: if Temer is weak, will he be able to approve reforms and fiscal measures? That brings a lot of uncertainty to the economy and investors.”

On the other hand, the entry of Republican Donald Trump into the White House may also affect the resumption of Brazilian growth. Even if the mogul does not implement protectionism on the American market, as promised during the election campaign, the “unknown Trump” raises doubts for Brazil. This is because the US is one of the main destinations of Brazilian exports.

“It’s a government still surrounded by a lot of uncertainties. So depending on the radicalism about protectionism in other countries, this could generate a stronger global turbulence, especially if we think about the relationship between the US and China,” says Campos. “And then, the effects for Brazil, via risk aversion and markets, would be more intense.”

 

Georges Sadala Rihan

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