Brazil is going through a period of great instability in the financial markets, with the dollar at historic highs (now quoted 4.13) and the stock market strongly down. Also on the “real” economic front, the long-awaited and expected economic growth shows more and more signs of weakness, with the consequent negative effects on unemployment.

The growth of GDP in the second quarter of 2018, calculated by the IBGE, stood at + 0.2% compared to the first quarter of 2018, even more disappointing if related to the revision of the growth of the first quarter, past from + 0.4% to + 0.1%. These values ​​suggest a 2018 GDP growth closer to 1% than the 1.44% forecast by economists last week.

The Superior Electoral Court (TSE) has confirmed the ineligibility of Lula, who can not therefore be the candidate of the PT to the Presidency of the Republic; the PT will appeal to the Supremo Tribunal Federal, which is sure to confirm the decision of the TSE.

The last Datafolha research, carried out on August 22nd without Lula among the possible candidates, sees the following scores: Bolsonaro 22%, Marina Silva 16%, Ciro Gomes 10%, Alckmin 9%, Alvaro Dias 4%, Haddad 4% and away the others with 2% or less.

A little more than a month before the first electoral round, is strenghtening the candidacy of Bolsonaro, populist of extreme right and great unknown in terms of economic policy of its eventual government (considering its declared ignorance on the theme).

With the start of the radio and television electoral campaign, Alckmin (which holds 45% of the electoral space) could recover part of the separation from the other candidates, as well as Meirelles (16% of the space). The PT has about 20% of the time, but still lives in the uncertainty of what will be its candidate, since Lula will almost certainly be excluded by right.

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% 1,44%


Further reduction for the 2018 GDP growth forecast, which went from + 1.55% at the beginning of July to + 1.44% today. The causes of this turbulence are mainly due to internal factors: the electoral uncertainty does not allow to make reliable forecasts on the economic policy of the next government, causing nervousness among the economic operators and blocking the investments of the companies; and the aftermath of the April truck drivers’ strike, which continue to make their effects felt on economic activity.


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% 4,16%


Forecasts for inflation in 2018 are slightly up, estimated at 4.16%. The effects of the truck drivers’ strike are still felt, which have caused a structural increase in transport costs. The depreciation of the real is also contributing to the increase in inflation expectations.

  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 3,80


The dollar has exceeded the quotation of 4.20 reais during the last week, coinciding with the Argentine crisis. After the intervention of Banco Central – which offered dollars through swap contracts – the quotation has decreased, but remains above 4 reais. The economists consulted in Banco Central’s Focus research predict that the dollar will close the year listed at 3.80 reais.

The euro has also been valued in recent weeks, and is now listed around 4.80 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% 6,50%
Real interest (deflactor: IPCA) 2,50% 2,10% 4,20% 2,60% 6,91% 4,05% 2,34%


The discount rate (SELIC) at the end of 2018 was stable at 6.50%. As inflation is rising but still within the planned fluctuation limits, Banco Central prefers to keep SELIC at record lows so as not to further depress the 2018 GDP growth.


The Brazilian stock market (Bovespa)

The Ibovespa index is now around 76.3 thousand points, against 85 thousand at the beginning of May and at 73.5 thousand points at the beginning of July. To weigh on the quotations is above all the electoral uncertainty, with the most welcome candidates to the market still in the rear.