Could it be taking off? Could it (again) take off? This is the optimistic question that the British magazine asked itself The Economist,, which in the latest issue dedicated an extensive article to Brazil and to the probable new economic miracle of Lula, re-elected president of the South American locomotive for the third time in November 2022. The political-economic weekly, which has always been the thermometer of the moods of the Western financial community , launched into an enthusiastic endorsement of the president elected for the first time in 2002 and who in his first two terms had already succeeded in the feat of significantly reducing the poverty and illiteracy rates of a country which, under Bolsonaro, has instead returned to the UN Hunger Map, which today marks 70 million Brazilians (out of 200 million) in a state of food insecurity, of which 10 million are undernourished or malnourished.
Brazil: Fitch upgraded rating for first time since 2018 over Lula's 'major reforms'
From this point of view, which is a priority, Lula will have to start the job anew, but in the meantime, in a few months he has put Brazil back in the saddle in the presence of the international community, once again winning the trust of the financial world. Yet in this respect the former trade union leader, now 77, had got off to a terrible start: in March, a survey conducted among Brazilian managers and analysts had highlighted a 90% rate of distrust in the government's work, practically a resounding rejection , while in a more recent survey the percentage dropped to 44%. Not only that: the Economist observes that for the first time since 2018, when it opted for a downgrade, the rating agency Fitch on July 26, it raised Brazil's sovereign debt rating to BB from BB-, with a stable outlook. Fitch justified the decision by arguing that "despite persistent political tensions, the country is implementing important reforms to address the economic and fiscal challenges", and that "the macroeconomic disengagement is higher than expected".
Brazil: the architect of the relaunch is the Minister of Economy, Fernando Haddad
The architect of this alleged new golden age in Brazil, rather than Lula, is its economy minister Fernando Haddad: lawyer, university professor, former mayor of Sao Paulo and presidential candidate - defeated by Bolsonaro - in 2018. The Economist draws a profile of his very high reputation, quoting various analysts. "Investors are increasingly optimistic", "an efficient finance minister and the favorable international scenario help", are some of the comments, among which that of Robin Brooks of the IIF in Washington stands out: "People are looking to Brazil today like they haven't done for ten years." On Haddad, Brooks claims that he is the decisive contribution to 2-3 key reforms, in particular the fiscal one, "which could open a new phase of stability for Brazil". Then of course he also helps the global scenario, "with the war in Ukraine which is putting the wheat market in crisis, of which the South American country is a major producer".
As evidenced by the recent rally of the Sao Paulo Stock Exchange, investors were very welcome by the cut in interest rates, which is among the highest in the world and had not been touched by the Central Bank for almost a year. The Economist observes that the Brazilian central bank "was the first major central bank in the world to cut rates, just as it was the first to raise them." Bloomberg also expressed its opinion on the rate cut, noting that it was even greater than expected: half a point instead of 0,25, with the Central Bank in a dovish version towards Lula, with whom there had been no lack of controversy in recent months, when the president had repeatedly urged the intervention of the financial institution, which instead had claimed its autonomy. "It will be interesting to see how Lula moves now," the financial newspaper even joked, alluding to the fact that this move by the Central Bank will take away the president's propaganda space.
Lastly, the Economist mentions the figure for the trade balance, which sees Brazil – in truth for some years already – sailing in largely positive territory (it exports almost 50 billion dollars more than it imports), while the average of Latin American and emerging countries is below zero, not to mention Turkey which loses over 100 billion and India which in the early 2000s it had roughly the same balance as Brazil, and by 2023 it had plummeted to -$280 billion. However, Brooks himself, in the English weekly, invites us not to be too optimistic: “History teaches us that it is better not to exaggerate with enthusiasm. Brazil has huge potential, but still travels under its category. The global scenario and Haddad's dexterity are points in favor, but a good policy will be needed in the long term”, argued the analyst of the Institute of International Finance.
