Brazil has been away from the international news, not because it is doing fine, but because there is war in Ukraine and war in Israel and elections in the USA, Great Britain and in France.
Away from the news, but the fundamentals of Brazil’s economy are going sour. The currency is devaluing, even with a interest rate as high as 10,5% (7% in net terms) and inflation is high, estimated to be 4% a low number due to the modifications in the method in measuring it.
The fundamentals are deteriorating not only because of the external factors, but due to problems inside Brazil.
The biggest problem is the interest rate that could have been reduced in the last meeting of monetary policy, but was kept stable, signaling the market that the Central Bank of Brazil still believes inflation has not been tamed. International oil prices are still rising and the active conflicts in Ukraine and Israel look like will keep the oil price high for a while.
Government does not help much in the scenario, due to increasing fiscal deficit with perspective of it increasing in the next few months due to the mayoral elections in next October. The usual quid pro quod will be played and this means that the fiscal situation is worsening.
This version of president Lula is different from the previous presidencies. The previous one, from 2003 to 2010 rode on the boom of commodities and the whole world was in awe to the financial profligacy of his tenur.
This time the commodities boom is gone, his presence was barely noted in the last G-7 summit in Italy. He has spent a lot of time travelling with his new wife and has distanced himself from day to day politics, this has allowed the Centrist Group in Congres, named Centrão, to grab power and overturn vetoes and create barriers against presidential legisltative powers.
Lula, as usual, uses the federal budget to get his proposals through Congress, weakening the fiscal balance and thus keeping the interest rate high, for there is expectancy that inflation will increase, but even this distribution of money is not working well, because the coffers of the federal government is short in money, most of the budget already committed to the mandatory expenses, with little discretionary room for maneuver.
There are problems to be solved in the Social Security funding, but Congress this week is entertained in discussing the regulation of abortion. President Lula is an abortionist, but Brazil being the greatest Catholic population in the world and with a large population of protestants, have not elected a Congress that is willing to pass abortion.
Lula wastes political capital in a secondary – if important – matter, while there are more pressing issues to sort out.