The first days of April were marked by the chaotic imprisonment of former President Lula, who is dividing Brazil into two opposing sides.

With the presidential elections just around the corner (there are 6 months to vote), there are still no strong candidates and few signs of how the votes of those who still today declare their preference for Lula will be distributed.

The same PT has no idea how to handle the situation of the imprisonment of its natural candidate: he does not want to abandon Lula, choosing an alternative candidate (the former mayor of Sao Paulo, Haddad?), but at the same time knows that his candidacy is now compromised for obvious legal reasons. Not having the courage to decide to launch a new candidate, it will probably leave this decision to the TSE (Tribunal Superior Eleitoral) in the coming months, denying the candidacy of a condemned in the 2nd degree, as indicated by the law called “Ficha Limpa” .

On the economic front, positive signs come from the automotive sector, whose sales in the first quarter of 2018 increased by 15.6% compared to the same period of 2017. Even better the heavy vehicle market (trucks and buses), up by 55% .

On April 4, the government announced the closure of 39 contracts for the generation of electricity, an investment estimated at 1.6 billion dollars. These are 29 solar power plants, 4 wind power plants, 4 hydroelectric plants and 2 biomass powered thermal plants. The plants will be in operation starting from 1/20/2022.

Let’s see some updated data:

GDP (Value added at market prices)

2012 2013 2014 2015 2016 2017 2018
GDP – real growth (%) 1,8% 2,7% 0,1% -3,9% -3,5% 1,01% 2,80%

 

The forecast of GDP growth in 2018, estimated today at + 2.8%, slightly decreased.

 

Inflation and real/dollar exchange 

2012 2013 2014 2015 2016 2017 2018
IPCA (IBGE – %) 5,80% 5,90% 6,40% 10,67% 6,29% 2,95% 3,53%

 

The inflation rate forecast for 2018 is still down, estimated at 3.53%.

  2012 2013 2014 2015 2016 2017 2018
Exchange rate R$/US$ (end of the period) 2,04 2,34 2,66 3,90 3,25 3,25 3,30

 

Without fluctuations the real / dollar exchange rate, expected at 3.30 at the end of 2018.

Despite the stability of the forecasts for the end of the year, the real is going through a period of tension, mainly due to the social and political crisis. The dollar today is 3.37 reais, the highest value seen since the end of 2016 (1 US $ = 3.39 R $, 19/12/2016).

As a result, the euro has also been valued in recent weeks, and is now listed around 4.14 reais.

 

Interest rate

2012 2013 2014 2015 2016 2017 2018
Nominal Interest rate (end of the períod) 7,30% 10,00% 11,80% 14,87% 13,75% 7,00% 6,25%
Real interest (deflactor: IPCA) 2,50% 2,10% 4,20% 2,60% 6,91% 4,05% 2,72%

 

The discount rate (SELIC) at the end of 2018 was significantly down, estimated at 6.25%. The persistence of low inflation pushed Banco Central to lower the SELIC to 6.5% in March, thus presaging a possible further cut of 0.25% in the coming months.

The real discount rate (adjusted for inflation) at the end of 2018 fell therefore below 3%, something that has not happened since 2015 (in a context of high rates and high inflation).

 

The Brazilian stock market (Bovespa)

The Bovespa is now around 85 thousand points, penalized mainly by the performance of international markets, under stress for the possible trade war between the US and China.

On the internal front, a climate of relative optimism is maintained, waiting for the election campaign for the election of the President of the Republic to take place in October.