We start the 2018 year that will be important from the political point of view for Brazil. You may be wondering. And from the economic point of view?
The question is relevant, but the economic scenario for that year is already practically defined regardless of the elections. It is because the degree of corruption and knowledge of the deterioration of Brazilian institutions by financial agents are already well known. No one believes that there will be harsh actions against corruption. It will continue even on a smaller scale, to focus on the three powers of the republic. It will only end when a statesman with the backing of society comes up and “iron hand” in their attitudes.
He will have to implement a rigid policy against corruption and significantly change the political structure we have lived in the last few decades. Unfortunately, there is no pre-candidate that we knowable to put the country definitely on the correct rails.
It can’t deny that President Temer and his good economic team, regardless of politics, even on a dubious political base, have been able to approve measures that will bring many benefits to future presidents. For example, the law that makes it impossible to increase the expenses of the previous year. This proposal was adopted in the FED in the Obama administration and had fantastic results that President Trump is enjoying.
The public university class of the so-called “left of Brazil” that in practice does not exist, and the press highly engaged in the process of overthrowing President Temer, have not yet been able to understand what was approved.
President Temer will be of great benefit to the nation if he can approve the pension reform at the beginning of the year. It not achieved, surely the next elected president will have in the short term a problem of unimaginable dimensions.
That said, what will be the possible scenarios for that year in Brazil.
Scenario 1. Brazil approves the pension reform, even with a provisional content.
Scenario 2. Brazil does not approve the pension reform, or President Temer leaves because of health problems.
In the first case, this would bring positive influences to the stock market, more investments for Brazil, and an increase in economic activity that will reach a GDP of just over 3% per year. Inflation below target, falling unemployment rate, increased imports, and lower interest rates.
In the second case, financial agents would become more apprehensive, and there will be more fluctuation in the exchange rate that could inhibit imports. As for growth and other macroeconomic fundamentals, they must have the same behavior, because politics no longer can change the opinion of economic agents. Everyone knows the need to combat the crisis of systemic corruption in the country.
Regardless of what the scenarios occur, it will be favorable for China because Brazil should import more than in 2017. What changes is that in scene one, imports will increase more and will be better for China.
It will be essential to stay on the edge of the political process because no kind of politician or party could benefit China more or less. It is a fantasy story of the PT and of public institutions that try to maintain their privileges and take advantage of the fact that justice in Brazil still can not punish the corrupt as it should. Thus, they try to induce that better situations for China would be through them. It is an excellent nonsense because whoever the president-elect will have full intention to strengthen relations with China