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Frustrating Brazilian economic growth in 2019: less than half the forecast at the start of the year

Thursday, March 5th 2020 - 08:46 UTC
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Brazil’s President Jair Bolsonaro took office at the start of last year with promises to rejuvenate Latin America’s biggest economy Brazil’s President Jair Bolsonaro took office at the start of last year with promises to rejuvenate Latin America’s biggest economy

Brazil’s economy expanded by 1.1% in 2019, marking a third straight year of frustrating activity following a massive recession, according to data released on Wednesday.

The 1.1% growth in 2019 was less than half the forecast at the start of the year, and its worst performance since bouncing back from the two-year recession in 2015 and 2016, according to data from the government’s statistics institute. It grew 1.3% in the subsequent two years, well less than half the global average.

Brazil’s President Jair Bolsonaro took office at the start of last year with promises to rejuvenate Latin America’s biggest economy. But political turbulence hampered the government’s reform agenda, tight fiscal policy constrained domestic demand and a crisis in neighboring Argentina sapped exports.

“When an economy is weak like this, it doesn’t take much to trip it up. When you think back to start of 2019, people were quite optimistic,” William Jackson, chief emerging markets economist at Capital Economics, said. “Brazil’s economy is simply not showing signs of significant recovery and, the longer it continues to disappoint, the more people will stop expecting growth above 2%.”

Growth last year was led by family consumption, which rose 1.8% compared to 2018, and investment that grew 2.2%, according to the statistics institute.

The last time Brazil’s economy expanded more than 2% was 2013. Economists started 2020 with an outlook for faster recovery this year, but have already begun cutting forecasts — partly a result of the spreading new coronavirus. On March 3, one day before release of Brazil’s activity data, Goldman Sachs cited the virus and its impact on global activity as rationale for lowering its Brazil call to 1.5%, from 2.2% previously.

However, leading indicators for the first quarter “were already pointing to soft growth even before the February intensification of the coronavirus outbreak,” Alberto Ramos, Goldman’s chief Latin America economist, wrote in a report.

Categories: Economy, Politics, Brazil.

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  • DemonTree

    JB
    Re your comment on “Chile's main rock festival...”

    “TV Globo, concluded, after analysing 5,870 messages on the internet, that 90% were fake news”

    Yikes, that's even worse than I expected. And Youtube's algorithm seems to promote stupid conspiracies like the flat earth, because they keep people watching longer.

    I get the impression that ordinary people have mostly given up on holding the politicians to account. It's hard to keep that level of pressure up for long, besides that people are probably a lot more divided now.

    I don't think you can entirely blame the governments for Brazil's problems, though. There's lots of factors, internal and external, that make it hard for countries to develop. That's why I asked about the neighbours; they're mostly not doing any better, several have much worse problems. How many countries have managed to join the first world in the last 50 years? Very few.

    The changes in Brazil made a real difference to many people, they weren't just cosmetic. It's hard for me to know how much things have gone backwards, though. GDP per capita has dropped a lot but it's still well above 2003 levels, Poverty has increased but most measures are still a lot lower than in 2003. Unemployment I think is worse, though. 2003 is a long time ago, it's hard to remember what things were like back then. Now the PT has been out of power for nearly four years, and things are still pretty bad. Temer's government, at least, did not do much better at getting Brazil out of recession.

    Unlike the sex of angels (weird coincidence; I just read an essay saying common ideas and images of angels are based on eunuchs in Byzantium), political systems can be changed by the people who live in them. If America switched to PR, that would probably allow for more parties. And if Brazil required a minimum size/vote share to get funding, that would probably reduce the number there.

    Re the Amazon, how was the 'day turned to night' when the smoke from forest fires blew over SP?

    Mar 06th, 2020 - 09:47 pm 0
  • Jack Bauer

    DT
    “get impression ordinary people have given up holding politicians to account”…when one realizes the Law is ineffective to get rid of them, most give up. I’d say most people are confused, while the parties are just focused on furthering their power, for personal gain.

    If Brazil had been colonized by the British it could be similar to the USA, but it was the Portuguese.

    When many in govt are only interested in becoming rich quickly, 'n there’s no easy way to prevent them, you get Brazil.

    To cut a long story short, imo, the gap btwn LatAm & first world is the exclusive fault of the people - i.e., govts & populations - and their cultures.
    Latin American countries may go through temporary economic booms, giving the impression they're going in the right direction (=> first world), but the underlying mentality eventually screws things up.

    “The changes in Brazil made a real difference to many people, ...weren't just cosmetic” ...over which period ? and they are ?

    I’m guessing that GDP per capita alone doesn't tell the whole story - if the richer get richer, the poor get poorer, the ‘per capita’, only as a cold nbr, may ‘seem’ to improve.
    Current unemployment levels today are thanks to the PT...proof that their “way of running things” (corruption, populism) failed.
    PT's been out of power for 3 ½ years, but the problems it caused were enormous, unprecedented. How long did it take the US to recover from 2008, even considering they were far better prepared to deal with it ?
    Temer, at best, was a welcome buffer btwn the PT ‘n 2019.

    “political systems can be changed by the people who live in them”…yes, provided they are smart enough and united (against the ruling ‘elites’).

    The Nat'l Institute of Meterology explained the phenomenon as an atypical combination : 18th Aug (pm), a cold front arrived from the coast, temperature dropped 13C in 24 hours. Low lying black clouds, heavy with rain, plus 'some' smoke from the AMZ, & Bolivia, contributed to the darkness.

    Mar 08th, 2020 - 06:36 pm 0
  • DemonTree

    “If Brazil had been colonized by the British it could be similar to the USA”

    Definitely the North East would not be, because the economic system was similar to the Caribbean Islands (and to British Guyana, which is not at all like the US): big sugar cane plantations with the work done by slaves. That's no basis for a successful country; there's no chance for industrialisation and no consumers to provide demand for products. The southern US had a similar economy although not so exclusively, and is still the poorest part of America today. Perhaps the south of Brazil and Argentina might have fared better? Argentina got a lot of investment from Britain anyway, though. The political instability and fall in GDP rankings seem to date from about when the US became more powerful than the British Empire...

    “the gap btwn LatAm & first world is the exclusive fault of the people - i.e., govts & populations - and their cultures.”

    I'm not so sure. For comparison, 30 years after the fall of communism, there's still a significant economic gap between the former East and West Germany:

    https://www.pewresearch.org/fact-tank/2019/11/06/east-germany-has-narrowed-economic-gap-with-west-germany-since-fall-of-communism-but-still-lags/

    Two parts of the same country, separated and then reunited. How long will it take for them to equalise, if they ever do? And over that time West Germany has spent at least €2 trillion on modernising and subsidising East Germany. No one's been pouring money into Brazil or other Lat Am countries. Developing a country just isn't as easy as it looks. Once you get behind, it's hard to catch up.

    Changes in Brazil - lower poverty, higher incomes, more people in formal employment, many joining the middle class. All now gone backwards to a greater or lesser extent. Agree GDP per capita does not tell the full story. Brazil has one of the highest levels of inequality in the world, but until 2016 it was falling:

    tradingeconomics.com/brazil/gini-index-wb-data.html

    Mar 08th, 2020 - 11:19 pm 0
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