March 20, 2017

On 7 March was announced the official result of the Brazilian GDP of 2016, slightly worse than expected (-3.6% against -3.5%-expected). It is interesting to note the contribution of the various macro-growth/decrease of GDP in recent years, as the table below.

In 2016 was in particular the agri-food sector to lose ground, even if it represents “only” 5% of the Brazilian GDP. The drought has affected in particular the result of crops of corn and cotton. The positive factor is that in 2017 are expected record crop harvests , while on the side of the cattle weigh still modest recovery in consumption of the familiea and the uncertainty of the effects of the recent scandal “carne fraca.”

2011 2012 2013 2014 2015 2016
The trend of annual GDP 3,9% 1,8% 2,7% 0,1% -3,9% -3,6%
Agri-food 5,6% -2,5% 7,9% 0,4% 1,8% -6,6%
Industry 4,1% 0,1% 1,8% -1,2% -6,2% -3,8%
Services 3,4% 2,4% 2,5% 0,7% -2,7% -2,7%
Household consumption 4,8% 3,9% 2,9% 0,9% -4,0% -4,2%
Government consumption 2,2% 3,2% 2,2% 1,3% -1,0% -0,6%
FBCF (*) – Gross capital formation 6,6% -0,6% 6,1% -4,4% -14,1% -10,2%
Export 4,8% 0,5% 2,1% 2,1% 6,1% 1,9%
Import 9,4% 0,7% 7,5% 7,5% -14,3% -10,3%

The FBCF index measures how firms have increased their capital goods, or goods which are used to produce other goods (machinery, equipment and materials of construction…). This value is important because it highlights the extent to which a country’s production capacity is increasing or decreasing. In this sense, the weight percentage of GDP of FBCF (table below) is steadily declining, a signal of a dangerous falling of the investments, also in view of technological renewal of the Brazilian industrial park.

2011 2012 2013 2014 2015 2016
FBCF (% of GDP) 20,6% 20,2% 20,5% 19,7% 18,2% 16,4%

 

Let us look at some fresh data:

GDP (Value added at market prices)

2011 2012 2013 2014 2015 2016 2017
GDP – real growth (%) 3,9% 1,8% 2,7% 0,1% -3,9% -3,6% 0,48%

Stable the forecast for the GDP growth by 2017, around a half a percentage point. A survey by the IPEA highlighted in February, up 0.3% of economic activity compared to January, with positive signals from the automotive industry (+ 5.9%) but also negative by the steel sector ( -3.5%).

Inflation and real/dollar exchange 

2011 2012 2013 2014 2015 2016 2017
IPCA (IBGE – %) 6,50% 5,80% 5,90% 6,40% 10,67% 6,29% 4,15%

Always falling inflation rate forecasts to 2017, passed by 4.43% a month ago at 4.15%. Surely is the most positive news for the Government Temer, betting on a more expansive monetary policy by the Central Bank.

  2011 2012 2013 2014 2015 2016 2017
Exchange rate R$/US$ (end of the period) 1,88 2,04 2,34 2,66 3,9 3,25 3,29

Fairly stable exchange rate forecasts R $/US $ to end 2017, today estimated at 3.29 (was 3.30 a month ago). Yesterday, 21/3/2017, the Exchange was at 3.09, exactly like a month ago.

 

Interest rate

2011 2012 2013 2014 2015 2016 2017
Nominal Interest rate (end of the períod) 11,00% 7,30% 10,00% 11,80% 14,87% 13,75% 9,00%
Real interest (deflator: IPCA) 4,80% 2,50% 2,10% 4,20% 2,60% 6,90% 4,85%

Edged down the predictions of the discount rate (SELIC) by end 2017, now attested at 9%. This is a consequence of the continuous process of downsizing in inflation which gives way to an acceleration of the cut by the Central Bank. Real interests, thereby also decreased under 5%.

 

The Brazilian stock exchange (Bovespa)

The Bovespa Index (Ibovespa) has fallen below 63mila points after finishing almost overcome the historical level of 70,000 at the end of February. On this negative performance has weighed heavily the evolution of stocks Petrobras, serving the low oil prices (now about US $47 a barrel) and the publication of financial results for the third year, in 2016 following negative (loss of 14.8 billion reais in 2016). But I will be more accurate in a specific post on Petrobras in the coming weeks.