The scenario for the Brazilian economy for the rest of the year and 2020 has changed little. According to the Focus Bulletin, economic activity must grow by 0.92% in 2019. For next year the figure is slightly more optimistic, with growth estimated at 2%. Optimism increases after the Senate passed the Pension Reform, which was the big challenge for the government in 2019. The trend is that the focus turns to the Tax Reform. On the other hand, the economic policy adopted by the government has been assertive, with the primary focus still on the control of the public deficit. Besides the already mentioned reforms, the government also prepares a privatization program. Moreover, measures that stimulate economic activity are still on the agenda, such as the release of the FGTS accounts.
In the external environment there are still several foci of tension that prevent more aggressive movements of appreciation of the real, even in a scenario of assertiveness of the economic policy that has been adopted by the government. The main foci of tension are as follows:
– Trade war. The market is eagerly awaiting the signing of a first phase of the US-China agreement, which must only happen in December. Even complex issues such as intellectual property and forced technology transfer seem to have reached a common denominator. China also pledged to buy USD 40 to 50 billion in US agricultural commodities. There was also a signal of removal of tariffs from both parties. An occasional agreement is relevant to Brazil, which has become notable in recent months through soybean and animal protein exports to China;
– Political tension in Argentina. The recent victory of Alberto Fernandez in the presidential elections produces instability. The market is concerned over a possible change in the economic policy adopted in the country. Recalling that Argentina goes through a serious crisis;
– Brexit. In Europe Brexit is still a major focus of tension. After another defeat in parliament, the UK’s exit from the European Union was postponed until January 31. A spokesperson for British Prime Minister Boris Johnson announced there will be no extension, the UK will leave the European Union, with or without agreement in late January.