Coronavirus frustrating Brazil’s anticipated economic rebound

By Carla Samon Ros

Sao Paulo, Mar 29 (efe-epa).- The coronavirus pandemic has frustrated the anticipated takeoff – or rebound – of the Brazilian economy after the deep recession the country experienced in 2015-2016, and it has buried the liberal agenda of President Jair Bolsonaro, one of the world’s leaders who has been most skeptical about the seriousness of Covid-19, the sometimes deadly pneumonia the virus causes.

Bolsonaro took office on Jan. 1, 2019, promising to get the Brazilian economy moving after two years of weak growth during which the gross domestic product increased by only 1.3 percent in 2017 and 2018 but then grew even less – 1.1 percent – during the first year of his mandate.

The pandemic is another deep pothole in the road and, at a stroke, has erased the optimism that had prevailed regarding the bounce-back ability of South America’s largest economy.

The government already has reduced its growth forecast for 2020 from 2.1 percent to 0.02 percent, while the Central Bank has reduced its own growth estimate for this year from 2.2 percent last December to zero percent.

Concerned about the numbers, the leader of Brazil’s ultraright has downplayed the seriousness of Covid-19 – which he calls “a little bit of flu” and “a little cold” – has demanded an end to the massive stay-home campaign and has called on Brazilians to go back to work.

According to Bolsonaro, radical measures must be avoided because it’s necessary to keep the Brazilian economy afloat and put a halt to the wave of unemployment, which in February affected some 12 million people.

“The coronavirus crisis found the Brazilian economy in a situation of low immunity and structural fragility,” economist Bruno Carazza told EFE, referring to the effects that are still being felt from the 2015-2016 recession, when the GDP lost six percentage points.

Bolsonaro has taken a series of moves to mitigate the disruptive effects of the pandemic but, according to some economists, the government’s economic response has been “slow” compared to that of other countries.

The administration on Friday announced an emergency line of credit for small and medium businesses earmarked to pay workers’ salaries for two months and amounting to 40 billion reais (about $8 billion), along with a reduction in interest rates on all loans.

The proposal comes in addition to other initiatives, including an economic stipend of 600 reais ($120) per month for informal economy workers as well as an injection of 55 billion reais ($11 billion) to help companies partially alleviate the impact of the crisis.

Economist Henrique Castro, who teaches at the Getulio Vargas Foundation School of Economics, said that the moves so far are “insufficient” and the lack of a “consistent support program” for the most vulnerable Brazilians could result in “big social conflicts” in a country with “a great deal of social inequality” and with 40 percent of the economically active public working in the informal economy.

Carazza, meanwhile, said that if the government doesn’t come up with “more concrete (economic measures), the lack of confidence and despair will continue in Brazil.”

In fact, the Industrial Businessmen’s Confidence Index stood at 60.3 points in March, 4.4 points lower than in February and the largest drop since June 2018, according to the latest report prepared by the National Confederation of Industry (CNI).

The former president of Brazil’s Central Bank, Arminio Fraga, last week emphasized the need to “act quickly,” saying however that – in his judgment – “that is not happening.”

In an interview with the daily O Globo, Fraga warned that if social isolation is not pursued strenuously in Brazil, as the World Health Organization is urging, the country’s economy could suffer a second “blow.”

“The government hasn’t taken account of the seriousness of the situation or, if it has, it is placing political objectives ahead of this mission, which is economic and social,” said Carazza, who is also a professor at the Brazilian Institute of Capital Marketing (Ibmec), a private university specializing in teaching and research in the fields of business and economics.

EFE