Brazil ranks seventh in the world economy.

Despite the growth of this country has always been exceptional, in 2011 began to experience the first signs of exhaustion due to the stagnation of the price of raw materials export, stagnation of domestic consumption (due to household indebtedness ) And the decline in investments. This is why the Brazilian economy has been in recession since 2014, and continues until the third quarter (-3.5% in 2015).

In 2015, the Brazilian economy sank even further into recession, at the same time worsening budgetary problems. All attempts at budget adjustment and inflation control failed, and in addition, Brazil’s sovereign credit rating was degraded by credit rating agencies, leading the country to lose its coveted quality of investment grade.
The social world of problems are not minor. The country has one of the highest levels of inequality in the world and there are strong regional disparities and there has been an increase in crime and criminal violence. The unemployment rate on the other hand increased by 7.5% in 2015.











As we have already mentioned, Brazil experienced an unprecedented economic and political crisis, with two consecutive years of recession (2015-2016). A deceleration in private consumption, the main engine for growth, and a decline in investment were the main causes.

What is the future of Brazil in 2017?

In 2017, a slow but steady recovery in the Brazilian economy is expected to bring about macroeconomic stability, thanks to ongoing budgetary adjustments and the return of confidence within the industrial and service sectors, which would also lead to an increase in During the year.
The government’s plans for public sector concessions (airports, highway sections) are also expected to attract local and foreign private investors.
The development bank of Brazil (BNDES) is also expected to contribute and help by offering financing solutions to interested parties.
It is possible that, despite the moderation of inflation, household consumption continues to suffer due to the high level of unemployment and declines in the supply of bank credit.
With regard to Foreign Trade, thanks to exports mainly primary, will contribute positively to growth. On the other hand, imports will remain subdued.
Finally, interest rates will experience a possible gradual reduction thanks to the deceleration of inflation, progress in budgetary reforms and the still slow recovery of economic activity.

The Government wants to reduce the deficit in public accounts and work on it.

With the coming to power of Michel Temer in May 2016 following the dismissal of Dilma Rousef, the budget adjustment plan was announced to curb the growth of public spending, which is likely to be gradually reduced.

Within this public expenditure readjustment plan, measures will be taken, such as the establishment of a ceiling for increases in such expenditure, which means that a constitutional amendment (PEC) is placed before Parliament. The PEC was approved in the first ballot in the Chamber of Deputies and in the Senate in late 2016.

In 2017, economic activity is expected to recover but in a very slow way since the political agenda should also focus on reform of the retirement system, including the extension of the contribution period with a minimum legal retirement age of 65 reforms to labor law, including a relaxation of working time provisions, are also on the political agenda.

All of these initiatives aim to:

  • Reduce future public deficits that appear
  • Reduce the growth of public debt, above all, in terms of the country’s external solvency.

The risk associated with external public debt is limited since 75% of the debt is held by residents.

However, appreciation of the dollar could have an impact on the real exchange rate during the year, despite the gradual resurgence of confidence in the country among investors.
As for foreign trade, the current account deficit contracted as we discussed during the article in 2016, due to the resurgence of the surplus of the foreign trade balance due to the fall in imports.

There may be a deceleration of imports more specifically in consumer goods due to the rise of the US dollar and the low level of demand of households. That is why the trend is likely to continue in 2017. However, exports will benefit from the agricultural sector (mainly soybeans) and the livestock sector.

brasil riesgo pais exportacion

To a lesser extent, exports of manufactured goods will benefit from the weakness of the real and the gradual recovery of regional demand, which could lead to increased exports of services (mainly transport) to neighboring countries.The promotion of conventional policy measures, pension reforms and labor laws, however, are likely to weaken the new government’s popularity, given that the Temer government does not have the support of the entire population. Brazil’s foreign policy to focus on building the country’s exports and its strategic partnerships with Argentina, China and the United States.