At the meeting of the Monetary Policy Committee (COPOM), which ended on 19 June 2024, the Banco Central decided to maintain the discount rate (SELIC) at 10.50% per annum. The decision was made unanimously, therefore with the consent of the 4 members appointed by Lula.
For more information: https://updatebrazil.wordpress.com/2024/06/20/breaking-news-the-banco-central-interrupts-the-process-of-cutting-the-discount-rate/
Inflation measured at the end of June recorded an increase of 4.06%, a significant increase compared to the previous month (-3.70% at the end of May).
Food prices are increasing more than average.
The unemployment rate recorded in the quarter March – May 2024 is 7.1%, a decrease compared to the previous quarter (7.5%). This is the lowest level of unemployment since 2014. There are 101 million employed, an increase of 3 million compared to a year ago.
According to research by the IMD (Institute for Management Development), Brazil has lost two more positions in the world competitiveness ranking, going from 60th to 62nd place out of 67 countries studied. Behind Brazil there are only Peru, Nigeria, Ghana, Argentina and Venezuela. Among the major critical issues identified are the poor offer of training programs for managers, poor efficiency of the public sector and excessive bureaucracy.
On July 4, the government announced the new “Plano Safra”, a credit offering program aimed at financing agricultural production in 2024/25. In total it will be 508 billion reais (about 90 billion dollars). The subsidized interest rates vary from 7 to 12% per year.
On June 19, the Senate approved a law that creates tax incentives for producers of “green hydrogen”. In order to access the incentives, the plants will necessarily have to use renewable energy for the production of hydrogen: solar, biomass, biogas, hydroelectric and wind.
The 71st edition of the Cannes Lions Festival, the great celebration of global advertising, has concluded, with 92 lions rewarding the creativity of Brazilian agencies. Two Grand Prix, 14 gold, 31 silver and 45 bronze lions were won. Among the most awarded agencies are DM9, AlmapBBDO and GUT.
News from the business world
The Zamp company, which controls the operations of Burger King in Brazil, has bought the Starbucks coffee shop network in Brazil for a value of 120 million reais. The network belonged to Southrock, which went into administration at the end of 2023.
DASA and Amil, two giants of the Brazilian health sector, have announced a joint venture bringing together 25 hospitals and cancer centers. The new company will be called Impar Serviços Hospitalares and will have a turnover of around 10 billion reais per year. Before becoming operational, the joint venture must be approved by the CADE (Administrative Council for Economic Defense).
Magazine Luiza and Ali Express (online commerce platform of the Chinese Alibaba group) have entered into a commercial agreement which provides for Ali Express to sell Magazine Luiza products (especially white line appliances) on its platform. On the other hand, Magalu will offer products from the Ali Express assortment (IT, clothes and children’s products) in its marketplace.
Here is the trend of the main economic indicators:
GDP (Value added at market prices)
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| GDP – real growth (%) | 1,8% | 1,4% | -4,1% | 4,50% | 2,90% | 2,92% | 2,09% |
The Brazilian GDP growth estimate for 2024 is still stable, estimated at +2.09% per year.
Inflation and real/dollar exchange
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| IPCA (IBGE – %) | 3,69% | 4,20% | 4,38% | 10,0% | 5,62% | 4,47% | 4,02% |
The 2024 inflation forecast continues to grow, going from +3.88% at the beginning of June to +4.02 today.
The violent devaluation of the real in the last month has certainly contributed to accelerating price growth. If this phenomenon continues, the Banco Central will be forced to increase the discount rate again.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Exchange rate R$/US$ (end of the period) | 3,75 | 4,01 | 5,19 | 5,57 | 5,25 | 4,95 | 5,20 |
The dollar is quoted today (9 July 2024) at R$ 5.42, a strong increase compared to a month ago (R$ 5.28).
The real was the currency that devalued the most in the world in 2024: -11% in dollars and -8.5% in euros. The markets anticipate economic trends, move based on expectations and the signals coming from the government are not at all reassuring: if the drift in public spending continues and monetary policy becomes more accommodating, the real economy could also deteriorate quickly
On July 2, the American currency reached its maximum price at R$5.66 and then fell to today’s 5.42.
The euro is quoted today at R$ 5.86, also a strong increase compared to the price a month ago (5.75). Like the dollar, the peak was reached on July 2: R$6.09.
Interest rate
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Nominal Interest rate (end of the períod) | 6,50% | 4,50% | 2,0% | 9,25% | 13,7% | 11,75% | 10,50% |
| Real interest (deflactor: IPCA) | 2,81% | 0,30% | -2,38% | -0,75% | 8,13% | 7,21% | 6,48% |
The discount rate (SELIC) is 10.50% and no cuts are expected by the end of the year.
In a few weeks, after the government changed (decreased) the fiscal target for the next three years, the forecast therefore went from 9% to 10.50%, which led to an increase in the real rate close to 6, 50%
The Brazilian stock exchange (Bovespa)
The Ibovespa closed the session of 9 July 2024 at 127,108 points, +4.3% compared to the closing at the beginning of June (121,802 points on 4 June 2024). Growth in the period was +1.9% in dollars and +2.4% in euros.
Since the beginning of the year, the Ibovespa has fallen -4.2% in reais, -6.9% in dollars and -7.4% in euros.
The last seven stock market sessions closed in positive territory, reversing the negative trend that lasted more than half of June and recovering part of the losses accumulated since the beginning of 2024.
In recent days Lula has moderated his tone regarding public spending and stopped attacking the Central Bank, reassuring the markets regarding the trajectory of public spending and the maintenance of a monetary policy that protects the value of the real.
This virtuous circle, starting from the improvement of the expectations of economic operators, can allow the Brazilian economy to grow in a solid and consistent manner.
Once the fiscal and monetary danger has been defused, the Brazilian currency could gradually revalue and return to the levels of early 2024; foreign capital, fleeing in the first months of the year, could return and give breathing space to companies listed on the Brazilian stock exchange.
