Trade & Investment
In a little over a year, the Brazilian government has implemented structural reforms that have reverted the harshest recession in national history, creating a positive economic environment and job and income generation.
It was by no means an easy task vis-à-vis the great dent in public accounts, rampant inflation and one of the highest interest rates in the world, which were a feature of the country's economic framework in the first months of 2016. In addition, burdensome bureaucracy served as a barrier to industrial production and hiring by businesses.
As a way of winning back Brazil's credibility in relation to investors, the first measure presented was the public spending cap. With this policy, passed at the end of 2016, the Brazilian government showed its commitment to fiscal responsibility, as well as the effort to reduce the country's indebtedness. This started turning expectations around, generating trust and credibility vis-à-vis economic agents - businesspeople, investors, economists.
At the same time, as a result of a record-breaking yield in the agricultural and livestock sector, food prices dropped in a surprising manner. Together with the renewal of trust and a responsible policy by the Central Bank, inflation – which had reached double digits – started falling, paving the way for the drop in interest rates, which today stand at 7%, the lowest in history.
The Central Bank's mission is to control inflation, which ensures the country's financial stability. With more credibility and an autonomous and effective interest rate policy, it has been possible to make the economic environment even more positive: low interest rates mean more credit for the population and companies, which start producing more wealth.
One of the biggest signs of the trust Brazil holds and the upturn in economic power is the positive trade result with other countries. The change in economic policy appealed to partner countries, who began consuming more Brazilian products.
This can be seen in the positive trade balance - which is the difference between a country's exports and imports. This year, the final projected value is between US$ 65 and US$ 70 billion, a milestone for Brazilian international transactions.
If the period between January and November this year is taken into account, the trade balance adds up to US$ 63.04 billion, breaking the previous record of US$ 47.7 billion reached throughout the whole of 2016.
This means more production by the national industry, as well as more jobs and income generated in Brazil.
Resumption of employment
As a result of the reorganising of public accounts, cutting of red tape and improving economic indicators, it was possible for an upturn in the economy to be seen, which consequently, leads to more jobs.
From January to October, 302,2 thousand formal job vacancies were created. That is, the private sector started hiring again since the beginning of the economic recession.
Unemployment is still high, but indicators show that an improvement is to come: data from the Brazilian Institute of Geography and Statistics (IBGE) shows that in the last quarter alone, an additional 1.1 million people started having income again. Over the year, this figure adds to 2.35 million Brazilians.
With the labour modernisation, this should only improve. The new rules removed deadlocks and have updated the legislation, so that companies may find it easier to hire and dismiss, with more legal certainty.
A lot has to be done to consolidate this upturn. The Brazilian economy has come out of recession and in the last quarter, the Gross Domestic Product (GDP) increased 1.4%, when compared with the same period last year.
In order for this to continue, more measures have to be adopted, particularly the Pension Reform, which today is the main culprit in hindering the Federal Budget and increasing the dent in public accounts.
When passed, Brazil will have ever more room for growing and especially, to make public investments in areas like health, education, infrastructure and security. In the short-term, passing the measure will enable Brazil to continue to experience low inflation and interest rates, high levels of trust, organised accounts and job creation.
Source: IBGE, CAGED, MDIC
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