Despite a concerted effort that has vaccinated over 40% of the population (15 points above world average and almost twice the coverage across several peers), Brazil is still struggling to tame the pandemic. While on a downward trend, infections and casualties remain elevated, extending the toll on the economy and fiscal accounts. Political polarization is increasing, with polls showing Lula as the favorite to win over Bolsonaro. The rebound in activity reaffirms the economy’s resilience, but the underlying trend-growth remains disappointing.

Moreover, a sequence of supply shocks (food and oil prices, a drought that limits the supply of electricity and makes it much more expensive, and increased risk aversion that destabilized the exchange rate) are propelling inflation beyond the target in 2021. Consequently, the Selic rate may have to approach 7% to tame 2022 inflation expectations. Although the overall fiscal accounts will improve this year from the plunge of 2020, projections by the Senate’s Budget Office (IFI) forecast deficits until 2024 and an unyielding level of Gross Public Sector debt-to-GDP approaching 90%. Higher interest rates and lower growth could push the debt trajectory even higher. For investors, the rollercoaster performance and possibility of increased volatility as the elections draw near are a concern.

The Chamber brought together a notable group of economists and political scientists to discuss these themes in our “Brazil: Midyear Economic and Political Outlook.”

Panelists:

José Carlos Carvalho, Partner & Chief Economist, Vinci Partners

Christopher Garman, Managing Director for Latin America, Eurasia Group

Zeina Latif, Principal, Gibraltar Consultoria

André Loes, Managing Director, Morgan Stanley Research

Shelly Shetty, Senior Director, Fitch Ratings

Moderators:

Drausio Giacomelli, Head of EM Research, Deutsche Bank Securities

Paulo Vieira da Cunha, Principal, Verbank Consulting LLC

Check out our highlights

To watch this event details check out on our YouTube profile.