The GDP for the second quarter of 2019 was up by 0.4% compared to the previous quarter, a result that positively surprised the markets and prevented Brazil from entering into a technical recession (determined by two consecutive quarters of GDP decline). An excellent news, which acts as a counterweight to the world-wide storm caused by the increase in fires in the Amazon forest, on which the government has been cornered and which can cause serious consequences for Brazilian trade.

I will go into the topic of the Amazon problem in a specific post next. For the moment, I refer to the post (unfortunately prophetic) that I published in December 2018:

At the beginning of September, Brazil and Argentina signed a commercial agreement concerning the automotive sector. The goal is to reach free trade between the two countries, without quotas or tariff barriers, by 2029. The process will be gradual, but already in 2020 an increase of about 15% of Brazil’s export quota towards Argentina (which is a net importer of vehicles produced in Brazil). More information:

A study by the Fundação Getulio Vargas, a summary of which was published exclusively by the newspaper O Estado de São Paulo, shows a decline in Brazilian productivity in the second quarter of 2019. Those interested can find the article at this link:,produtividade-registra-queda-de-1-7,70003003760.

Let’s see the update of some economic indicators.

GDP (Value added at market prices)

  2013 2014 2015 2016 2017 2018 2019
GDP – real growth (%) 3,0% 0,5% -3,5% -3,3% 1,0% 1,1% 0,87%

The decline in Brazilian GDP growth forecasts has finally stopped. The positive signal of the second quarter of 2019 and the expansive positioning of the Banco Central are giving greater optimism to economic operators. The government is facing considerable financial problems, which risk blocking the activities of ministries and federal bodies (including some universities) and is seeking solutions to avoid increasing the fiscal deficit of 2019, now set at R $ 139 billion.

Inflation and real/dollar exchange 

  2013 2014 2015 2016 2017 2018 2019
IPCA (IBGE – %) 5,90% 6,40% 10,7% 6,29% 2,95% 3,69% 3,54%

Inflation under control and with a tendency to a further reduction, which would bring it to an all-time low of 3.5% per annum in 2019. This increases the probability that Banco Central will continue in the process of cuts in the discount rate, today at 6%.



2013 2014 2015 2016 2017 2018 2019
Exchange rate R$/US$ (end of the period) 2,34 2,66 3,90 3,25 3,25 3,75 3,87

The dollar is quoted today at R$ 4.12, still strong on the real (a month ago it was quoted at 3.87). The weakness of the real is linked to both the trend of decreasing the discount rate and the turbulence of international markets (Argentine crisis, US-China trade war, euro zone slowdown).

The euro is now listed as R$ 4.52, also in strong appreciation compared to a month ago.

Interest rate

  2013 2014 2015 2016 2017 2018 2019
Nominal Interest rate (end of the períod) 10,00% 11,80% 14,87% 13,75% 7,00% 6,50% 5,00%
Real interest (deflactor: IPCA) 2,10% 4,20% 2,60% 6,91% 4,05% 2,81% 1,46%

The end-of-year forecast of the discount rate (SELIC) has decreased from 5.25% to 5.00%, which would be a new historical low. With inflation falling, the real interest rate would remain at 1.46%, a value that is also unpublished for the Brazilian parameters.

For the government it would be a huge relief for the cost of public debt, an important step towards a greater fiscal balance.

The Brazilian stock market (Bovespa)

The stress of the markets after the collapse of the Argentine stock exchange in mid-August and the commercial tensions between the US and China has caused a sharp downsizing of the Bovespa index, reaching 98 thousand points. In the first days of September the stock market showed a good recovery, thanks to good internal economic data and an international détente, returning to around 102 thousand points.

According to investment director Banco Itau, Claudio Sanches, the Ibovespa target continues to be around 120 thousand points at the end of 2019. Read his interview at the link:,a-bolsa-ainda-e-nossa-maior-aposta-para-o-ano-diz-diretor-do-itau,70002992590