The Brazilian economy is beginning to show some positive signs after the collapse of March and April, amidst the social isolation measures imposed by the coronavirus pandemic. According to the Brazilian Institute of Geography and Statistics (IBGE), industrial production, for example, grew by 8.9% in June, compared to May. It is the second month in which the industry rises, but it is still insufficient to eliminate the loss of 26.6% accumulated in the first two months of quarantine paralysis. Among the activities that grew the most are the production of vehicles, beverages and the extractive industries.
The Minister of Economy, Paulo Guedes, maintains that these indices show that Brazil is recovering on a path similar to "the V of Nike." The sports brand logo has the second most reclined leg, which suggests a slower recovery than the fall. "It is not going up again with the same speed that it fell, but it is going up month by month," Guedes said at a public hearing in Congress for tax reform on August 5. “The collection of the ICMS [tax on the circulation of goods and services] is 3 or 4% below the first half of last year. In other words, the recovery is coming with some force ”, he assured.
The financial market projects a 5.6% drop in GDP for this year, according to the first Focus Bulletin, released on Monday, which brings together the forecasts of more than 100 financial institutions, compiled by the Central Bank. The report maintained the projection that it brought in previous editions that the Brazilian economy will grow 3.5% in 2021. For 2020, the Government estimated a 4.7% drop in GDP, while the IMF projects an even greater collapse, of 9.1%.
Economists consulted by EL PAÍS affirm, however, that talking about economic recovery is still hasty in a scenario of strong uncertainty in relation to the development of the pandemic. They also consider that the most favorable performance of some indices was artificially increased, to a great extent, by the Government's aid programs for companies and by the transfer of income from the emergency minimum income program, which in June reached almost half of households.
"The true dimension of the shock caused by the pandemic in the economy is lost, because it is being, in a certain way, cushioned", says economist Silvia Matos, researcher in the area of Applied Economics at the Brazilian Institute of Economics of the Getulio Vargas Foundation ( Ibre). “We can't get too excited. We need to see what is going to happen at the end of the year, when public aid ends or is at least reduced and revenues decrease ”, he concludes. The Itaú bank, the largest private financial institution in Brazil, projects an 8.5% rise for GDP in the third quarter and 1.9% the next.
The end of the emergency minimum income can generate, for example, an increase in unemployment, which in the second quarter was 13.3% –12.8 million people– according to IBGE. A growth of 1.1% in relation to the quarter ended in March, which shows a relatively stable scenario. “But today that unemployment rate is one of the least realistic rates, because many people are not looking for work and, therefore, they are not officially considered unemployed. Many were laid off during the pandemic and, as they are receiving 600 reais [of the minimum emergency income, slightly less than 100 euros], they are waiting for the pandemic to pass to look for work, ”says Matos.
In order to have a more adequate X-ray of the labor market, it is necessary to analyze the number of employed people in the country. With that perspective, a historic drop is seen in the second quarter: 9.6% compared to the previous period. In three months, almost nine million Brazilians were unemployed, and most of them were informal workers.
Economist Eduardo Correia, from Insper, also asks for caution when looking at the recovery data. For example, that of retail sales, which began to rise in May after the paralysis. “There was a suppressed demand. When the pandemic came, no one left the house and everyone stopped consumption for fear of being out of work. But when the quarantine was extended, some went back to making purchases that were already scheduled, "he says. "At the same time, the arrival of the emergency minimum income to the most vulnerable increased the income of these families, who began to consume, but ... and when that income ends?" He asks.
According to Correia, it is not yet known how long this trade opening movement will last. “The question is whether the covid-19 cases are not going to advance rapidly with the return of activities. Will the use of masks and certain rules of distancing be enough? If they are, we can start talking about economic recovery before there is a vaccine for the coronavirus, "he says. Otherwise, it warns that new closings of activities may become habitual and, then, the critical situation is going to be prolonged.
For Sergio Vale, chief economist at the MB Asociados consultancy, there was never a possibility of a recovery “in V” –that is, quickly– for the Brazilian economy, which was already doing badly before the health crisis and had registered a setback in the first trimester. “People are still with many reservations, many businesses that produce agglomerations - such as entertainment, transportation and tourism - are only partially opening, and some will not even be able to open. A quick recovery was unthinkable, ”he says.
Fiscal cost of the pandemic
Although the expectation is that the deepest recession has been concentrated in the first quarter of this year, the cost of the measures to combat the covid will extend for a long time. “The situation of the country's public accounts, which was already bad, became even worse due to the size of the [external] debt. Once again, a very large fiscal adjustment will be necessary. Not to mention that we had not yet recovered from the monumental recession of 2015 and 2016, ″ says Vale. "Since 2013, investments began to slow down and the economy has been going through continuous storms, which is bad for the stability of any business in the country."
President Jair Bolsonaro, according to this economist, tries to increase his popularity with the creation of a new income transfer program - Renta Brasil - and no longer worries about the fiscal difficulties facing the country. "The government is not looking at that properly," he says. Vale emphasizes that this behavior can generate even more stress in the financial market in the coming months. "What generates consequences: devaluation of the exchange rate, higher country risk. We are entering a more difficult scenario ”, he warns.
The short-term forecasts are not encouraging either. "Even coming out of the current crisis, we are probably going to return to an economy with very low growth," estimates Vale. Matos, from Ibre, agrees that as long as investment does not react, it is not possible to speak of a strong recovery. According to the Institute for Applied Economic Research (Ipea), investments fell 1.3% in June, compared to May, and 15.6% compared to last year. The second quarter presented a drop of 24.5% over the previous period and 23.1% in relation to the same period of 2019. “The investor will continue in a waiting period if he does not see a horizon. The economy needs stability of rules, low political tension and some fiscal solidity. Without that, we will continue to see chicken flights ”, says the economist.