In June, Brazil passed the threshold of 500,000 deaths from Covid-19. To date, 6 July, there are 525 thousand. With the onset of winter in the southern hemisphere, the contagion curve continues to worry, with a number of new cases exceeding 50,000 units per day.
The vaccination campaign (at least one dose) reached nearly 75 million people, about 35% of the population. The acceleration in June is a very positive figure, which hopefully will decrease the impact of a possible third wave of infections.
In the meeting ended on June 16, 2021, Banco Central decided to increase the discount rate (SELIC) by 0.75%, bringing it to 4.25%. This is the third consecutive increase, with the announcement of possible new increases in the coming months. The goal is to contain the growth of inflation, which has now exceeded 8% per year.
The debt / GDP ratio is improving, down to 84.6%. This is thanks to the acceleration of tax revenues, in turn the result of a consistent economic recovery that is consolidating. This is a very positive signal, which allows the state to better cope with the extraordinary expenses caused by the coronavirus emergency without causing the debt to explode.
Unemployment, on the other hand, is still high, continuing at 14.7% of the workforce, a record in the historical series that began in 2012. The effects of the economic recovery have yet to be felt in terms of employment as most companies are using a percentage still low of its production capacity.
The very serious water crisis continues, worsened by low winter rainfall. ANEEL (National Agency for Electricity) ordered an increase in bills at the end of June, which should serve to compensate for the greater and more expensive use of energy from thermoelectric plants, activated to compensate for the lower generation by the plants. hydroelectric. We recall that the Brazilian energy matrix is strongly based (80%) on renewable resources and mainly on water ones (65%) and climate changes are causing a strong variability in the volume of rainfall. If the situation were to worsen further, there could be the risk of rationing also for supplies to industries, with serious consequences for the economy.
The Parliamentary Commission of Inquiry (CPI) on the pandemic, in progress in the Senate, continues its work and is now investigating a possible corruption case concerning the negotiation of millions of doses of the Covaxin vaccine, which would involve representatives of the Ministry of Health and politicians linked to President Bolsonaro.
Investigated by the Federal Police for the crime of aiding and abetting companies linked to the illegal export of precious timber, the Minister of the Environment Ricardo Salles resigned on 23 June 2021. Joaquim Alvaro Pereira Leite was appointed in his place, but considered by the environmental associations as a figure linked to the interests of farmers and breeders rather than to the preservation and conservation of the environment.
The government has decided to extend the “auxilio emergencial” to families in need for another three months, thus extending it until October 2021. Even if the value is small (from R$ 150.00 to R$ 375.00 per month depending on the characteristics of the family unit), it is an important contribution for those families most affected by the economic consequences of the pandemic.
Here is the trend of the main indicators:
GDP (Value added at market prices)
|GDP – real growth (%)||-3,5%||-3,3%||1,3%||1,8%||1,4%||-4,1%||5,18%|
The 2021 GDP forecast is still growing strongly, from + 3.14% in May to + 5.18% today. Economic operators are very optimistic about Brazil’s potential growth, supported by unexpectedly positive public accounts. The extension of the “auxilio emergencial” will make a further contribution to the growth in consumption.
Inflation and real/dollar exchange
|IPCA (IBGE – %)||10,7%||6,29%||2,95%||3,69%||4,20%||4,36%||6,07%|
The 2021 inflation estimate is still growing, passing in a month from + 5.44% to + 6.07%.
The IPCA index for the last 12 months is now around 8%, but Banco Central expects it to decrease in the second half of the year.
|Exchange rate R$/US$ (end of the period)||3,90||3,25||3,25||3,75||4,01||5,19||5,04|
The dollar is quoted today at R$ 5.09, slightly higher than a month ago (R$ 5.04) but still much lower than three months ago (5.60).
The estimate of the dollar price for the end of 2021 is also down: R $ 5.04 compared to R $ 5.30 a month ago.
The market is therefore significantly decreasing expectations for the year-end listing, signaling that the trend reversal recorded could consolidate in the coming months.
The price of the euro on 6 July was 6.04 reais, down compared to a month ago (6.14), the result of the recent weakening of the euro against the dollar.
|Nominal Interest rate (end of the períod)||14,9%||13,8%||7,00%||6,50%||4,50%||2,00%||6,50%|
|Real interest (deflactor: IPCA)||2,60%||6,91%||4,05%||2,81%||0,30%||-2,38%||0,43%|
Expectations for SELIC at the end of the year are still increasing: 6.50% today against 5.75% a month ago and 3.00% at the beginning of the year.
In the mid-June meeting, Banco Central raised the discount rate (SELIC) from 3.50 to 4.25%. The market therefore expects at least three more increases of 0.75% by the end of 2021.
With these forecasts, the real interest rate (nominal rate minus inflation) should return to positive territory at the end of 2021. Today, considering inflation at 8.1% and the discount rate at 4.25%, the real interest rate is strongly negative (almost -4%).
The Brazilian stock market (Bovespa)
After closing the session of 7 June 2021 at an all-time high (130,776 points), the Brazilian stock market slowed down. This is probably a normal lateralization, after a few months of consistent growth.
But also of the effect of the rumors concerning the tax reform under discussion in Parliament, which provides for the possible taxation of 20% of dividends distributed by companies (not taxed today).
Ibovespa closed the session on 6 July 2021 at 126,920 points, -2.5% compared to the close of a month earlier. The decrease was -2.8% in dollars and -0.3% in euros.
Since the onset of the coronavirus crisis, the Bovespa index has gained 12% in reais and lost 2.5% in dollars and 11% in euros.