Brazilian President Predicts End of Recession in 2017
For those asking when the dark days of Brazil’s economic recession will end, President Michel Temer has an answer. According to the Brazilian president, 2017 will be a year of growth.
For skeptics who believe that lifting Brazil out of financial turmoil could take years, the numbers tell a different story. Inflation, which shot up to 10 percent in 2016, is now down to 6.29 percent (below the cap for healthy inflation of 6.5 percent). Unemployment, which started at 4.5 percent at the beginning of the recession and reached 12 percent in 2016, is now seeing a turnaround. And Brazil’s stock market is up by 20% from the end of 2016 to the first quarter of 2017. Brazil’s currency, the real, has increased in value against the dollar. Last year, the real was traded at over 4 reals, numbers not seen in over a decade.
Temer’s economic policies, such as allowing workers to withdraw from their Worker’s Severance Indemnity Fund (FGTS) accounts (estimated to put an extra R$30 billion reals into the economy in 2017) have helped stem the recession and increase foreign confidence in Brazil. Yet Temer’s biggest economic plan, reforming Brazil’s bloated pension system, has been met with resistance. The current system offers one of the earliest retirement ages and most generous social security benefits in the developed world. Any changes would mean that workers would lose these benefits.
Even though some Brazilian’s do not like Temer’s economic policies, foreign companies do. As confidence in Brazil’s stable recovery grows, foreign investment is starting to flow. In February of this year, the multinational steel company Ternium bought Brazilian steel maker CSA for US$1.3 billion.
As Brazil’s economic climb increases, it begs the question: is there anything that could stop it? 2018 is an election year and many fear that Lula, who served as president from 2004-2012 during Brazil’s economic golden years, will run again. Though Lula went through his presidency largely untinged, the presidency of his successor, Dilma Rousseff was filled with scandal. The corruption scandals have been highly publicized, with hundreds of high-ranking public officials, including Lula and Rousseff themselves, being dragged through Brazil’s courts.
Despite the scandals, Lula was one of Brazil’s most popular presidents and is a skilled politician. Temer’s greatest hope for a 2018 win is to continue focusing on economic reform. At a recent press conference, he held up the March 18 issue of The Economist, which shows Brazil, along with six other countries, on the rise. The cover is a far cry from the 2009 Economist cover featuring Brazil’s iconic Christ the Redeemer statue lifting off like a rocket during one of the country’s greatest economic periods. However, it is a hopeful signal of recovery for a country that has been mired in political scandal and economic distress.