Is the Brazilian recession near to an end?

After three years of recession, is the Brazilian economy starting to show signs of recovery?

‘’…the economy is getting better… I have the support of the press, well, you’ll see, we are going to end this year much better [than last year]. In 2018 we will be celebrating.’’

These are the words said by President Michel Temer, recorded last month in a conversation during a secret meeting with a businessman, who is involved in the latest corruption scandal in Brazil, at the Presidential Residence in Brasilia. The audios were released on the National News, during the ‘’Jornal Nacional’’.

One of the least popular presidents in Brazilian history has completed one year in power, since former President Dilma Rousseff, accused of manipulating figures of the national budget, was impeached.

After the end of the World Cup in 2014, the country has been going through tough times and recession eventually arrived.

According to several sources, a factor that played a significant part of the country negative growth was the manipulation of the government accounts and the corruption involvement of some of the country’s biggest companies. Having said that, it was no surprise that several investors have lost the confidence in the country, making investment run away.

However, after almost 3 years of negative growth, it has recently emerged that Brazil’s GDP has grown 1% compared to the previous quarterly period, meaning that the negative growth is over.

…but, is the recession really over?

Things are starting to look a bit better since Temer got in power-  thanks to the support he gets from the senate and congressmen for approving his controversial austerity measures, and also pushing several unpopular reforms, that are being received with optimism by the market – but not so well by the people.

Temer has also been attempting to push consumption up, creating new rules to release the social security fund ‘’FGTS’’, which previously workers were only allowed to withdraw in very specific cases, such the loss of their job.

According to IBGE (Brazilian geographical and statistical office) most of the GDP components still have a negative growth, however, Agribusiness has done so well, that it makes the GDP figures look promising. A big thank you to the export sector!

There is still a long way to catch up and a lot to improve.

Making things seem even more positive, the Brazilian Central Bank has lowered the interest rate to 10.25%. It is encouragingly the lowest figure in three years.

Although the country seems to be slowly heading towards better days, prices of goods are still very high compared to previous years, the consumption is still low and it is leaving the domestic market in a difficult position. Unemployment is also very high compared to previous periods, the number of workers out of job is 13.7% – the highest number since 2012. Translating it to the real world: people are still facing challenges when it comes to fill their cars with petrol or to do their food shopping.

So it is all looking good-ish and promising in the future, right? The recession is over then!

No, there is still a lot of uncertainty in the air. It is still too early to confirm that the recession is over for good, as the political scenario is far from stable. Having been recently caught dealing with a businessman to bribe the silence of politicians in jail, Temer has been the centre of scandals that seem to never end, meaning that a new direct or indirect election for president is not completely off the cards. Several politicians have been caught since the Federal Police operation ”Car Wash” begun in 2014 and it seems it is far from the end. Political instability won’t do the economy any favours. It looks like even if the current president leaves, there are not many options and who knows who would replace him when everyone is tainted by the same brush.

Even though people are no longer sitting back and accepting everything, as we can see after so many demonstrations, the culture of ‘’jeitinho’’ is a strong part of the Brazilian lifestyle, which means people will find ‘non-orthodox ways, of accomplishing something, even if it means breaking rules’ and it can be found in all the sectors of the society.

The most affected by the bad administration are the Brazilians, the ones who rely most on public services. The United Nations have estimated that around £47 bln, money that was meant for delivering services, ends up in politicians’ pockets, and for this reason there are no high expectations for the quality of these services. There are around nine million Brazilian children enrolled at private education and 28% of the population has private health insurance, creating an even wider social inequality gap.

The economy may be slightly showing small signs of recovery, however, they are still too small to make Brazilians optimistic enough to trust that the current Government will lead to an expressive growth.