The economic crisis has affected general development of Brazilian cities, but the most extensive damage was caused to the job market in more than 5,000 Brazilian local governments.

Data from Firjan (Federation of Industries of the State of Rio de Janeiro) shows that during the crisis, the number of developed cities in terms of employment and income has fallen by more than half. In 2013, there were 1,761 cities with high or moderate development; in 2016, there were 825.

To assess the level of development related to employment and income, Firjan monitors the creation of formal employment and income, wage bill and income inequality in formal work.

Between 2013 and 2015, the employment and income indicator for all Brazilian cities fell by more than 20%. Even with a small recovery in 2016, the index places cities at a regular level of development in this regard.

What is troubling is that, if the best growth average of Brazil’s historical data is maintained -1.5%, between 2009 and 2012 -, the indicator will only reach 2013’s level in 2027.

The employment and income indicator forms the general development index of Firjan, jointly with the basic health and education indicator. All indexes range from 0 to 1; the closer to one, the more developed the city.

Although recession has affected advances in basic health and education, such indicators still show a moderate level of development (approximately 0.76).

Source: Folha de S. Paulo

Brazil in October will hold general elections, which according to Itau BBA investment bank are the most uncertain since the country’s return to democracy in 1985. Here are the top presidential candidates and their respective economic advisers.

* Luiz Inacio Lula da Silva (Workers’ Party – PT)
Adviser: Marcio Pochmann is an economist who graduated from the Federal University of Rio Grande do Sul, a former president of Ipea, the Institute of Applied Economic Research, and currently works as a professor at the University of Campinas.
* Jair Bolsonaro (Social Liberal Party – PSL)
Adviser: Paulo Guedes has a doctorate from the University of Chicago and founded Banco Pactual SA in the 1980s. He is currently president of the administrative board of Bozano Investimentos and an Ipea director.
* Marina Silva (Sustainability Network – Rede)
Advisers: Eduardo Giannetti & Andre Lara. Giannetti is an economist and philosopher who studied at the University of Sao Paulo, while Resende is a former director of the Central Bank and former director of the state development bank BNDES. He’s currently a professor at the Insper business school.
* Ciro Gomes (Democratic Labor Party – PDT)
Adviser: Mauro Benevides is an economist trained at the University of Brasilia. He served as finance secretary when Gomes was governor of Ceara, and developed the economic program of Gomes’ 2002 presidential bid. He’s also a former state congressman and currently works as a professor at the University of Ceara.

* Geraldo Alckmin (Brazilian Social Democracy Party – PSDB)
Adviser: Persio Arida is a University of Sao Paulo-trained economist who earned his doctorate at MIT. He is also a former president of the Central Bank and worked on the Plano Real, the monetary stabilization plan of the mid-1990s.

Source: Bloomberg

The bank now sees GDP growth of 1.6 percent this year, according to its quarterly inflation report, compared to 2.6 percent previously.

“The revision is associated to the easing of activity at the start of the year, the weakness in confidence indicators for firms and consumers, and the prospect of direct and indirect impacts of the paralyzation of the cargo transportation sector at the end of May,” the report said.

The change highlights the deep impact of the protests, which extended through the final weeks of May, blocked major highways and triggered product shortages across the board.

The bank acknowledged it will be unable to clearly estimate how big a hit the economy took until economic indicators covering May and the following months are published. But higher-frequency data suggest an “expressive” impact over output and retail, the report said.

The remarks echo the bank’s assessment in its last policy meeting, when it left benchmark interest rates unchanged at an all-time low. According to the minutes of that meeting last week, the strike contributed to driving up uncertainty, leading policymakers to refrain from signaling future rate moves.

Several private-sector economists cut GDP estimates and raised inflation forecasts after the protests. According to the central bank report, inflation is likely to accelerate in June but then ease off in coming months as a slower-than-expected economic recovery keeps a lid on price hikes.

The bank forecast inflation of 4.2 percent in 2018 and 3.7 percent in 2019, unchanged from its previous estimates.

Public support for the protests, which led the government to introduce costly diesel subsidies even as it struggles to curb a growing budget deficit, has fueled concern among investors over the outcome of this year’s presidential elections.

That magnified an emerging-market selloff and drove the Brazilian real to a two-year low, bumping up import prices.
Source: Reuters

Brazil’s consumer confidence index dropped 4.8 points in June from May, hitting a 10-month low, according to a report published Tuesday by the Getulio Vargas Foundation (FGV).

The Foundation, a renowned Brazilian university and business think tank, said the indicator hit 82.1 points, the lowest figure since the 81.4 points registered in August 2017.

The indicator, which ranges from zero to 200, marks the confidence of consumers nationwide. Any figure below 100 indicates a lack of confidence.

Comprised of two indexes, the indicator measures current consumer perceptions and expectations for the near future. The FGV reported that both indexes registered falls.

The Current Situation Indicator dropped 5.4 points to 71.8 points, the lowest figure since September 2017. Similarly, the Expectations Index fell to 90 points, its lowest score since August 2017.

The FGV attributed the low June figures to truckers’ strike at the end of May, which caused a supply crisis and paralyzed most foreign trade for several days. There were food and fuel shortages across Brazil.

According to FGV representative Viviane Bittencourt, the strike intensified the consumer confidence indictor’s downward trend. She also highlighted the importance of unemployment rate.

“With negative perspectives on the job market, families become more cautious about their expenses. This should negatively impact economy growth in the second half of the year,” she said.

Source: Xinhuanet

First Deputy PM and Foreign Minister will be on an official visit to the Russian Federation on Wednesday and Thursday, the Foreign Ministry has announced.

According to a press release, Dacic and his high-ranking hosts will discuss joint projects in the economic and investment sphere, and cooperation on the international plane between Serbia and Russia.

During his visit to Moscow, within the framework of regular meetings at the high and highest level, Dacic will speak with Foreign Minister Sergei Lavrov and with Deputy Prime Minister and co-chairman of the Serbian-Russian Intergovernmental Committee for Trade, Economic, and Scientific and Technical Cooperation Yuriy Borisov.

Dacic will also be at the stadium on Wednesday to support Serbia’s national team in the World Cup game against Brazil.

Source: B92

It seems like two different Brazils. On one side, there is a country to be regarded cautiously after the truck drivers’ strike and the electoral uncertainties emerging on the horizon. On the other, there is an economy with “cheap” assets and the positive perspective of profits for companies.

The different perspectives are given by economists and managers analyzing the same data to decide what to do with their clients’ investments in Brazil.

It is healthy to have different opinions, says Axel Christensen, an investment strategist of BlackRock asset managers. Those who see the glass half full look at controlled inflation and the perspective of economic growth in the long term.

Tina Byles Williams, the president of FIS Group, believes that Brazil’s stock market, the country’s exchange rate against the dollar and other Brazilian assets have already taken quite a beating. She believes their prices are below fair.

The positive side appears mainly when Brazil is compared to other developing countries, such as Mexico, which will hold elections in July and is one of the most affected countries by the change in the U.S. commercial policy. Patrick Jamin, who is responsible for the investment strategies of North Coast Asset Management, says that investors already anticipate the risks that a non-reformist candidate might be elected – the market’s greatest fear. “There is a positive perspective for companies’ profits.”

There are pessimistic forecasts as well. Bank of America Merrill Lynch has reduced by 50% its projection for Brazil’s G.D.P. growth in 2018, from 3% to 1.5%.

Gabriela Santos, a global market strategist of JP Morgan Asset Management, believes the truckers’ strike had an impact on the economic activity which cannot be recovered.

Source: Folha de S. Paulo

Brazil’s current account surplus shrank mostly in line with expectations in May as a nationwide truckers’ strike paralyzed major sectors of Latin America’s largest economy, central bank data showed on Monday.

The current account surplus fell to $729 million from $2.8 billion in April, compared to the median estimate of an $870 million surplus in a Reuters poll of economists, bringing the deficit in the 12 months through May to 0.65 percent of gross domestic product (GDP). Foreign direct investments (FDI) in the month held at $3 billion, matching the consensus forecast.

Source: Reuters

According to a Datafolha poll, 32% of respondents mentioned former Brazilian president Lula as the most prepared pre-candidate to accelerate economic growth in Brazil.

The result is similar to the voting intention chart, in which Lula is followed by congressman Jair Bolsonaro (PSL), 15%, and Marina Silva (Rede), 8%.

Lula left his second term in office in 2010. He had high rates of popular approval and helped Brazil reach a GDP growth of 7.6%, the highest since 1985.

From 2014 to 2016, the country’s production and income dropped by 8.2%. Lula is the favorite candidate, for voters from all age groups and regions in Brazil, to change the country’s current situation. In the Northeastern region, 51% of the population sees PT as the best solution for Brazil’s economy; only 8% bets on Bolsonaro, currently ranked second.

Among respondents who had access only to basic education, Lula reaches 37%, and Bolsonaro 9%. Among respondents with higher education, they are stuck in a tie at 20%.

Lula has 40%, and Bolsonaro 11%, among the group with monthly incomes of up to two minimum wages. Among those with more than ten wages, Lula is the third (14%), behind Bolsonaro (22%) and Geraldo Alckmin (PSDB) (17%). Lula is technically tied with Henrique Meirelles (MDB) (12%).

Although Lula has been in jail since April 7, he appears at the top of the list of vote intentions when his name is included in polls. He is the preferred candidate for 30% of respondents. He was found guilty of corruption and money laundering, and cannot be elected, according to Lei da Ficha Limpa (Clean Record Law).

Source: Folha de S. Paulo

For the second consecutive time, the Central Bank of Brazil (Portuguese: Banco Central do Brasildid not change the economy’s benchmark interest rate. The Monetary Policy Committee (COPOM) unanimously decided to hold the Selic rate at 6.5% a year on June 20, 2018. The decision had been expected by analysts.

Latin America‘s biggest economy continues to emerge slowly from its worst recession in history, which extended through 2015 and 2016. The Central Bank has mounted a sustained campaign to breathe life into the moribund economy, slashing the Selic all the way from 14.25 percent in October 2016, a time when the country faced not only negative economic growth but high inflation.
In May 2018, the Central Bank interrupted a series of 12 consecutive cuts to the key Selic rate, citing volatility in the markets and investor frustration over the government’s inability to push through pension reform and other long-delayed austerity measures.
But in May 2018, an extended truckers’ strike brought the economy to its knees, adding to a rising sense of political uncertainty ahead of general elections in October. While the resignation of Pedro Parente, the chief executive of state-controlled Petrobras, raises ample amount of questions about political interference in key parts of the economy. So far, no strong candidate backs President Michel Temer’s stalled market reforms program.
In a note, the committee argued that the strike staged by truck drivers brought the economy to its knees, adding to a rising sense of political uncertainty ahead of general elections in October. That makes gauging the outlook for the economy more difficult.
“The stoppages in the freight sector in May make the readout on the recent economic activity difficult. Data on April suggest more consistent activity than in previous months. However, indicators on May and possibly June will likely reflect the effects of said stoppages,” the bank said in a statement.
GDP growth projections for 2018 have fallen from 2.45 percent just five weeks ago to 1.76 percent in the latest central bank survey of market expectations. At the start of the year, the forecast was for three percent economic growth. Also, forecasts for this year’s inflation rose to 3.8 percent, from 3.5 percent before the previous rate-setting meeting in May. The new inflation projections remain within the central bank’s target range, which centers on 4.5 percent, with a 1.5 percent margin to each side.
Source: Indrastra

The next president of Brazil will need to improve regulations in order to attract private investors in infrastructure as the government has no cash to develop planned projects, according to former central bank president Pérsio Arida (pictured).

“We have no cash to invest right now and I have bad news, this scenario will remain the same for the next administration. We need to improve rules to attract private sector investors to finance infrastructure projects,” Arida said at a banking event hosted by Fitch Ratings. Arida was governor of the central bank briefly in 1995, under president Fernando Henrique Cardoso. He also presided over development bank BNDES during that decade.

Arida, who is working for the campaign of Geraldo Alckmin, a likely presidential candidate for the centrist PSDB party, defended a new regulatory framework for some sectors, especially sanitation.

“In the area of sanitation, we don’t have an established regulatory framework, and as a result there is not so much private investment in this area. We need to change that,” he said.

According to Arida, the good news is the fact that infrastructure projects in Brazil do not face problems of future demand.

“We have a lot to be done, but the positive thing for investors is that there is no lack of demand for projects. For example, Brazil needs many more railways to transport our commodities between all parts of the nation and ports. If you build a railway, you will find huge demand.”

Brazilians goes to the polls on October 7 to vote for the next president, state governors and legislators. So far, according to polls, candidates from the far right and far left have emerged as frontrunners, while centrist candidates such as Alckmin, with a more market friendly approach, are struggling to gain ground.

Source: BNAmericas