Economic news from the coronavirus front:
– the government has declared the state of public calamity, already approved by the Chamber of Deputies and to be sanctioned shortly by the Senate. The main consequence will be the possibility of increasing public expenditure and without the restrictions imposed by the mandatory ceiling of the 2020 tax deficit.
– Banco Central, following the example of the FED, reduced the discount rate (SELIC) by 0.50%, which is now equal to 3.75% per year.
– The government, through a decree-law, authorized companies to reduce their employees’ working time and wages by 50%. Companies will also be able to anticipate holidays, order collective holidays and use overtime hours to leave officials at home.
– Again by decree, the monthly payment of federal taxes by small companies (members of the “simples nacional” tax system) was postponed by 6 months.
– Informal workers (the majority in Brazil, like domestic workers, Uber drivers, small artisans) will receive R$ 200.00 (45 dollars) monthly help.
– General Motors has suspended production in its five Brazilian factories and the R $ 10 billion investment expected between 2020 and 2024; Mercedes will suspend production from March 25 to April 20, Volkswagen has decided to suspend operations for ten days, from March 31 to April 10.
Museums, theaters, cinemas, gyms and all places of aggregation closed. Shopping centers and shops are expected to close to the public in São Paulo, with the exception of supermarkets, restaurants, pharmacies and petrol stations.
Two ministers and the president of the Senate have been infected with the coronavirus and are in solitary confinement. Today the fifth death in Brazilian territory related to the coronavirus was announced.
A considerable increase in coronavirus cases is expected in the next two weeks and the Brazilian health system still appears completely inadequate to deal with the emergency: intensive care beds, respirators, in some cases even gloves and masks for those who work in public hospitals are missing .
The Brazilian stock exchange
The Bovespa index dropped to 64 thousand points (11.21 on March 19), down 46% compared to the beginning of the crisis (February 21); in dollars and euros the loss is 52%.
The worst performance from 21 February to 19 March 2020, among the large listed companies, is that of Petrobras: – 61%
The dollar is quoted R $ 5.15 (11.00 am)
The euro is quoted at R $ 5.55
As in the rest of the world, the prospect is that of a recession 2020. The government, especially through fiscal leverage and public spending, will have to make bold decisions to implement a strong anti-cyclical policy. The survival is at stake not only for businesses but above all for many, too many people without economic and health conditions to face the coronavirus catastrophe.