By Ivan Ryngelblum
In an increasingly uncertain world, with growing concern about stagflation and geopolitical tensions, economist Nouriel Roubini shows optimism about the prospects for Brazil, which may benefit from the prospect of a commodities supercycle beginning to form.
Known for his pessimistic predictions regarding the economy, to the point of earning the nickname “Dr. Doom,” Roubini said that the situation the world is about to experience, with the combination of rising inflation, energy transition, and fighting global warming, is generating a favorable environment for commodities for the next ten years.
“For Brazil, there are significant opportunities because we are in a commodities supercycle,” Roubini said on Monday, May 8, during Citi’s CEO & Board Lunch event.
“Commodity exporters will do well in this scenario.”
According to him, less investment is occurring in the oil and gas market with the energy transition.
At the same time, however, the advance of clean matrices is not enough to offset the reduction in the use of fossil fuels.
And even in the face of the expectation that global growth will not be robust as it was before the pandemic, there will be increased demand for a variety of commodities, from metals to agricultural products, the latter being affected by some supply constraint caused by the effects of global warming, with desertification of certain regions.
“I expect this supercycle, in structural terms, to remain for at least the next decade,” Roubini said.
“If there is some kind of economic slowdown, some kind of correction will occur, but it will be temporary.”
In this respect, Brazil should also benefit from a good relationship with China, as it may also see a greater interest from the United States.
For Roubini, besides the fact that Brazil is a powerhouse in commodities, the Americans will want to have good relations to counter some of Beijing’s influence, paving the way for trade and investment agreements.
“People will court Brazil and Latin America. The Chinese will, the Europeans will, the United States will too, so that’s positive,” he said.
The optimism about Brazil, however, did not come without criticism.
Roubini warned that the world could fall into trouble with populism, which may adopt anti-market policies that could damage economic growth.
“Brazil can be a success story, but that requires macroeconomic stability, without doing things that could hurt growth potential but keep it at or above current levels,” he said.
Roubini’s warning about the risks of populism worldwide came accompanied by several other points about problems he sees ahead.
These include the high rate of indebtedness of countries, companies, and people, the effects of de-globalization on inflation, and artificial intelligence resulting in social problems and higher unemployment of the low-income population.
With information from NeoFeed