«le Brésil est en faillite» declare le president Jair Bolsanoro.
« Brazil is bankrupt, I can not do anything », this statement comes from Jair Bolsonaro. Attributing the crisis to the virus fed according to him by the press, the Brazilian president put an end this month to the program of massive aid. Vital for the poorest, the program proved too costly for the country plagued by debt and an unprecedented public deficit
According to President Bolsonaro the collapse of the Brazilian economy is due to restrictions put in place by governors to fight the pandemic, but the situation is a little more complex.
The economic crisis linked to Covid-19 brought Brazil’s GDP back to 2009 levels. Internal and external demand, as well as production and services fell from mid-March. However, an upturn in activity in the third quarter ended the recession. Consumption and investment rebounded strongly.
Rather, the uncertainty arises from the authorities’ ability to agree on the spending limit. The markets are questioning the government’s capacity to restore public finances. The country’s debt would risk placing it on the brink of a social abyss.
Brazil needs reforms. They must relate to tax reform, the public service. More generally on the business environment and the role of the State within the economy. The pace of reforms was already slow before the pandemic, the crisis has come to put an additional brake.