In the absence of a total shutdown at the federal level, Brazil has quickly become one of the epicenters of the coronavirus pandemic. Since June it has been the second most affected country in the world behind the United States, with 15% of deaths and cases recorded globally: at the end of September there were 150 dead and almost 5 million infected. This year the pandemic has caused a severe economic crisis which is reflected in a contraction of the GDP expected between -5,5% (data Central Bank) and the more pessimistic estimates of the World Bank (-8%) and the IMF (-9%). A crisis that aggravated a recession already underway: in 2019 the Brazilian GDP had grown by 1,1%, the lowest figure in the last three years, and in the first quarter of 2020 it was already in a recession at -1,5% . The paralysis of productive activities mainly affected the tourism, services and industry sectors, already affected by a significant drop in demand, while the agri-food sector has grown. Soybean production set a new record with 125 million tons and the world record in exports, thanks above all to strong Chinese demand, which covers 75% of the total. The production of beef and chicken has also grown and with China playing a fundamental role: the trade war between Washington and Beijing has in fact favored Brazil, which is now a world leader in food production.
However, the pandemic has left its mark on the industrial and tertiary sectors. At the end of August there were 29 million unemployed (data IBGE, Brazilian Institute of Geography and Statistics), 3 million more than in May, reaching a record 13,6% of the total workforce. With the lockdown measures, at least thirty million Brazilians found themselves without a job within a few days: the underground economy made up of 5,6 million workers without social security paid the highest price. On this front, the federal government had the merit of acting quickly with an extraordinary aid program based on a monthly subsidy (emergency aid) of 600 reais, about 100 euros, for over 60 million Brazilians from May to August. A logistical and financial effort, costing the State 8 billion euros a month: according to a study by the IPEA, for 4,4 million Brazilian families this was the only source of income during the pandemic. The government confirmed the subsidy until the end of the year, but halved the amount to 300 reais per month. It remains an important but not sufficient aid, also due to the recent increase in the price of some foods such as rice, beans and oil.
For many analysts l'auxilio emergencial remains a successful political move by Bolsonaro, which not surprisingly has seen its popularity increase precisely in the poorest regions of the North-East. The president himself has suggested the creation of a new social assistance programme, the "Make Brazil”, which would replace both the Family Bag than a dozen other minor plans, however clashing with the liberal agenda of the minister of the economy Paulo Guedes, little inclined to the idea of a new welfare state. Thus, the results of the pandemic could also curb the privatization projects of large state-owned companies (Correios, Banco do Brasil, Caixa Federal, Petrobras) conceived by Guedes: the political cost of hundreds of thousands of layoffs in the sector could in fact be too high less than two years before the next elections.
The financial market expects growth of around 2021% for 3,5. The decrease to historical lows of the interest rate of the Central Bank (SELIC) can serve to restore a certain dynamism to the economy, also considering that a downward adjustment of the rates of mortgages and loans for individuals and companies is expected by the main banks.
2020 should end with a trade surplus of 55 billion dollars and a volume of foreign direct investments of 60 billion. From a long-term perspective, investing in Brazil can continue to be a good opportunity, considering the Real traded at 5-5,30 against the dollar. Brazil is still a young and deeply digital country, where large distribution chains are rapidly switching to electronic commerce, with good prospects for the future, provided concrete policies are implemented to support consumption. The fintech sector, high precision and infrastructure are open to new participations and even a market that is currently in a deep crisis like air transport could benefit from a deregulation that removes protectionist barriers. Much, however, will depend on government choices and international geopolitical balances. The strong opposition of some European leaders, Macron in primis, to Bolsonaro's environmental policy could freeze the free trade agreement between Mercosur and the European Union and with serious repercussions on the services sector. The next two years will therefore be decisive for understanding whether Brazil will be able to use this crisis as an opportunity to relaunch with a view to modernizing and reopening to the post-Covid world.
