Is Brazil… taking off?, risks the Economist, again – 02/08/2023 – Nelson de Sá

Famous for the image of Christ the Redeemer taking off at the end of the second Lula administration, The Economist magazine once again asked itself if this was happening — even before the cut in interest rates by the Central Bank. “I wonder if he’s… taking off?”, says one of his statements:

Also in the highlights, “Investors are increasingly optimistic” and “Efficient finance minister and favorable international scenario help”. This highlights the statement by Robin Brooks, “the bald one”, from the international association of banks and funds, IIF, in Washington:

“People are definitely looking at Brazil now in a way they haven’t in the last 10 years.”

About Fernando Haddad, shown in a photo with Lula (below), he says that “he is behind the two major reforms that can put Brazil on a more stable basis”, the tax and the fiscal framework.

On the external scenario, he cites the war, which “put at risk two of the largest grain producers”, Russia and Ukraine, and the end of the pandemic in China, “factors that increased demand from Brazil”.

“It also helps that the Central Bank is independent”, as the rate “among the highest in the world”, for a year, “looks like it paid off”. At the end of the text, he tries to “moderate optimism”:

“History warns against over-enthusiasm. Brazil has enormous potential but has been underperforming. The global backdrop and Haddad’s prowess are now raising investor optimism. But it will take consistently good policy.”

WHAT NOW, LULA?

On interest rates, Bloomberg reports that “Brazil begins a cycle of easing with a surprise cut of half a point”. In video (image above), the correspondent in Brasilia corrects that it was indeed between 0.25 and 0.5 and underlines the projection of further reduction. “It will be interesting to follow Lula’s reaction now”, he jokes, after Roberto Campos Neto was “among those who voted for the bigger cut”.

He cites the even bigger cut by the Chilean Central Bank, twice as much, but names the Brazilian as “the first major central bank” in the world to reduce interest rates, just as it was the first to increase — both times, in the opposite direction to that of the Central Banks American and European.

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