Wall Street bankers see Brazil without any significant disruption ahead, regardless of who wins in the polls in the second round: former president Luiz Inácio Lula da Silva (PT, left) or president Jair Bolsonaro (PL, right).
Sources who attended the formal annual meetings of the International Monetary Fund (IMF) and the World Bank, as well as the various side events that took place in the US capital between the 10th and 16th, told Estadão/Broadcast that executives from financial institutions in the US, Europe, and the UK evaluated that the right-leaning Congress is “key” to avoid more drastic changes in the country.
Amidst a challenging macroeconomic scenario, the message from meetings held on the margins of the IMF annual meetings was that Brazil stands out compared to Latin America and the world in some aspects.
The country is growing while the recession is haunting the world, interest rates have been raised earlier, and inflation is starting to slow down, with three consecutive months of decline. However, the fiscal situation still worries us – a lot.
“The consensus in Washington was that there is no room for major disruptions in Brazil, regardless of the change of government… Big changes in the economy. Why? The key factor is the right-leaning Congress. People like it,” said one banker.
Another, also on the condition of anonymity, reinforces that part of the risk no longer exists in the first round, with the balance of forces in Congress.
“If it’s da Silva, Congress is more to the right so that it will hold him back in any aggressive moves or heterodox ideas. Or, if it’s Bolsonaro, Congress also has the power to hold him back,” he evaluates.
SCENARIO
The perception that remained on Wall Street was that, while the developed world had a negative tone during the IMF meetings, with a “very high” level of uncertainty and distrust, for Brazil and Latin America in general, the conversations were “more positive”.
The Minister of Economy, Paulo Guedes, sold this scenario when commenting on the meetings he had in Washington, in which he argued that the country is “out of sync” with the global “dismal” scenario.
“I don’t know if exactly in his tone and direction. But the view is that Brazil has already done its homework by raising interest rates earlier. Inflation is starting to converge,” says an executive from a Brazilian institution.
Nevertheless, the fiscal issue remains at the center of Brazil’s concerns since the positive effect of tax cuts on inflation and the increase in social benefits tends to weigh further ahead.
The warning came from all sides at the IMF meetings. There is the concern that it is necessary to support the most vulnerable in the current scenario, but without taking their eyes off the fiscal one.
“When monetary policy puts its foot on the brake, fiscal policy must not step on the accelerator. If they do, they risk entering a pdangeroustrajectory,” said IMF Managing Director Kristalina Georgieva.