Brazil Economic Outlook – Bolsonaro still lost in Brazil

Brazil economy

By Emerson de Pieri – Barings Investments

Incoming data for 2019 has been mixed thus far, following a tepid end to last year. A high unemployment rate, which crept up in the October to January period, continues to plague household spending, while consumer confidence dropped to a six-month low in March. On a brighter note, industrial production grew solidly in February, despite plunging iron ore output following the Vale dam disaster.

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On 20 March, the government presented details on changes to military pensions, a precondition for Congress to start debating the critical social security bill.

However, the proposal underwhelmed expectations as changes to the military career path translated into a higher bill for wages, denting some savings from the reform. Meanwhile, the rocky political scene of recent weeks has spooked the Brazilian stock market. Reports of bickering between President Jair Bolsonaro and House Speaker Rodrigo Maia bode poorly for the smooth passage of legislation, while the arrest of former President Michel Temer could keep politics in the spotlight.

A family without control

What Bolsonaro needs to do is step down from the campaign stump, he needs to show who is in charge, at home and in government,

said Simone Tebet, head of the Senate’s Justice and Constitution Committee.

We were anticipating volatility in the negotiation process,The reform process will be supported by public opinion and Bolsonaro’s still high approval ratings.

said Shamaila Khan, director of emerging-market debt at AllianceBernstein.

For the president’s support base, the case against him is largely a media fabrication. The press is a regular target of Bolsonaro’s ire. Is not only this. For all Bolsonaro’s family “media is the enemy”, they use the social media to instigate the voters to go against the media or any person who they believe is not in faor of “their style”

Since Carlos Bolsonaro and his Justice Minister Sergio Moro publicly clashed last week with Maia, administration officials have tried to calm tensions and reassure investors. Moro said the standoff had been overcome, and Vice President Hamilton Mourao has been calling for increased dialogue among cabinet members.

The key points are clarity in our objectives, determination to achieve them and patience to have the best dialogue,

the retired Army General told Bloomberg News via text message.

Yet it is not the first time the government has promised more cohesion and harmony. In fact, this Tuesday did little to convince skeptics.

Editorials in all three of the country’s leading newspapers blasted Bolsonaro for the recent political turmoil and questioned his ability to carry out his presidential duties.

What he’s shown so far is that we’ll have 3 years and 9 months of more turbulence,

said Traumann, who advised former Finance Minister Henrique Meirelles.

In Brazil, we do not know who is in command: Bolsonaro’s sons or a professor based in Virginia.

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