Economic recovery will be a challenge of Temer, analysts say

For analyst you have to start all over again and prove to the market that the economic proposals are sound policies.
15/05/2016 12h20 - Updated 16/05/2016 08h00
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In 2007, when it was confirmed the largest oil discovery in the country's history, the pre-salt reserves, Brazil was experiencing unique moments or um. The economy had grown 6,1% that year, encouraged by the export of agricultural commodities. Inflation fell 6,88% in 2005 for 3,6%, the lowest rate since 1998. The confidence was unshaken and investors agreed that Brazil was the most promising of the Brics (Brazil, Russia, India, China and South Africa), with stable democracy, young population and abundant natural resources.

Less than a decade later, reality changed. The main Latin American economy plunged into the worst economic crisis of this century, aggravated by the sharp drop in commodity prices (raw material), by unsustainable increase in public debt, the impeachment process that paralyzed Congress and a corruption scandal at Petrobras.

The situation that the interim president, Michel Temer (PMDB), will have to face in the coming days is not favorable. The Gross Domestic Product (START, the sum of goods and services produced in the country) shrunk 3,8% in 2015, the worst drop in 25 years. A expectation for 2016 It is that the downturn remains around 3,8%. Inflation more than doubled in relation to 2007 and with it the basic interest rate exceeded 14%. Unemployment has two digits: 10,2% workers are out of the market, or represents 10,4 million Brazilians.

With the deepening recession, million Brazilians joined in the "new middle class" during good economic phase are returning to poverty. Study consultancy Trends, headquartered in São Paulo, provides that 3,1 million households, near 10 million people, return to integrate the disadvantaged population group. Social mobility seen in seven years (from 2006 a 2012) It can be erased in three (2015 a 2017), says study.

A great effort will have to be done to win back investor confidence and put the economy back on track. The founder of consulting for emerging markets EM + BRACE, Robert Abad, California-based, You think the new government will have to start all over again and prove to the market that the economic proposals are sound policies, which will take time.

"It took years for Brazil received an investment grade rating from credit rating agencies, for the market to believe that the miracle was happening ", says Abad. With the crisis, Brazil was downgraded by the three major international agencies (Standard and Poor’s, Moody’s e Fitch) and lost the title of good paying, what away foreign investment.

The economic platform presented by Vice President Michel Temer in October was well received by the financial markets, but received criticism from unionists. The bridge to the future are planned reforms, such as social security and labor, and changes in the constitution to allow a deep cut in government spending. The document provides for greater openness to foreign capital. The goal is to create conditions for Brazil to reach a sustainable development 3,5% a 4% per year in the next decade, challenging goal for an economy that must suffer contraction 3,8% this year.

many analysts, However, they are wary. "There will be a good start will, a honeymoon phase. But the street view, Temer is not much change. We do not know if the protests will stop ", says political scientist Anthony Pereira, director of the King's Brazil Institute, In London.

Datafolha poll conducted shortly after the House gave the nod to the request for impeachment pointed high rejection rate to the PMDB leader. On the contrary group Dilma, 54% of respondents said they were also favorable to the removal of Temer. Among Dilma supporters, the percentage of dissatisfied with Temer reaches 79%.

In Pereira's view, what will happen to the former President Luiz Inacio Lula da Silva will also influence the future of the country. "I would think that the left will quietly assume the role of opposition, but that's not how things happen. We can expect more social unrest ", says.

Lula, who can run for president in elections 2018, It is being investigated as part of Operation Lava Jato. Beyond, at least 34 members of the House and Senate, from different parties, They are under investigation. The operation, which is in 28th stage, has no end date.

Along with Dilma, Temer also faces proceedings in the Superior Electoral Court (TSE) for alleged irregularities in the campaign, which could result in the invalidation of the winning ticket in elections 2014 and loss of the post of vice president.

With these pressures on different sides, Analysts think the PMDB leader can not bring about significant reforms and revive the economy. "I see a slow recovery because growth pillars are crumbling in front. Social security is unsustainable, public debt continues to grow and there is a paralysis in the productive sector ", says economist Mark Casarin, da Oxford Economics.

The Fiscal Monitor report 2016, published in April by the International Monetary Fund (IMF), It predicts that Brazil will not reach a primary surplus, wherein the storage is larger than spending, before 2020. The IMF estimates a primary deficit 1,7% of GDP this year, less than or 1,9% recorded in 2015 (R$ 111 billion), the worst in the country's history. This is the third time in a row that the government can not save money to pay creditors.

para Casarin, one of the main problems that need to be addressed to restore fiscal balance is the Social Security. The Brazilian population has barely begun to age - the average age of the Brazilian in 2015 era 31,1 years, compared to 47,5 years in Germany, for example - and spending on Social Security already reached 44% the total government primary expenditure.

"The birth rate decreases and life expectancy increases rapidly. It is unsustainable. It is necessary to raise the minimum retirement age and changing the indexation rule. Pensions should be indexed to the minimum wage, but inflation ", says.

Brazilians retire, average, to 55 years, contribution time. In Germany, the minimum retirement age is 65 years.

For the former director of the World Bank and assistant professor at Fundação Dom Cabral, Carlos Primo Braga, Brazil has many competitive advantages and not plunge into a depression. "I have no doubt that, to get rid of uncertainty, gradually resume the pace of growth. This will not be a lost decade ", says.

The British, Brazilian mother of son, Daniel Hamilton, senior director at global consultancy business FTI Consulting, It is more pessimistic. He thinks that Brazil will never be able to promote the necessary reforms to the development until you have a smaller number of parties. "Almost 40 no matches Brazil. At least nine of them were represented in the government of the PT, asking for political favors and concessions here and there. No matter who is in power, because the policies will result in the same thing ", says. A political reform, However, It is under discussion in Congress for more than 20 years.

After seeing many missed opportunities over the years, Hamilton has little hope that Brazil will overcome the major problems that always prevented the country take off. Asked about his expectations for the future of the country, Hamilton cites a phrase attributed questionably the French leader Charles de Gaulle: "Brazil is the land of the future and always will be".

Source: Agency Brazil

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