COVID | Economics & Growth | Monetary Policy & Inflation
Six Myths About Brazil and the Market Implications
- By John H. Welch
- 1 min read
Local and international press paint Brazil in the throes of never-ending crises, between COVID-19, spiralling fiscal deficits and debt, and a struggling recovery. Although the situation is suboptimal, it is far better than the pervasive narrative in the media. Here is a summary before I take each issue in turn.
First, Brazil’s infection and mortality trajectories are on the decline. Second, Brazil has vaccinated over 40% of its population with at least one dose, higher than world, Asian, and South America averages and just below North America and Europe.
Third, growth is recovering quickly, like most parts of the world. Fourth, inflation has accelerated, but the all-important nontradable goods and service inflation rates remain well below 3% YoY. The Banco Central do Brasil (BCB) has started tightening. They have achieved unprecedented of a weak real exchange rate and relatively low inflation.
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All great points, John. Any views of why the Brazilian markets have performed so poorly of late? Just a big policy mistake, chasing tradable inflation? What real-interest rate (on NTNB’s) makes sense for the BCB to feel comfortable?