Economy Minister: Market underestimates Brazil growth potential in 2022

RIO DE JANEIRO, BRAZIL – Guedes argues that despite the pandemic, Brazil has a strong fiscal base and projects already contracted that foresee R$700 (US$128) billion in investments for the coming years.

“They continue to be wrong over the next year, underestimating Brazil. I’m not going to say how much we’ll grow, but just as they underestimated when we fell, this is now happening again,” he said.

“We have R$550 billion contracted and another R$150 billion from the 5G auction coming, and this is just the beginning, by the end of our term there will be much more,” he added, stressing that Brazil has regulatory frameworks to enable a new wave of investments.

Guedes this week met with CEOs of the largest French companies based in Brazil and he said the executives’ message was of optimism about the country.

However, in its latest Focus report, market projections collected by the Central Bank for GDP growth in 2022 were lowered from 1.20% to 1%, and several institutions are pointing to near-zero growth and warning of stagflation.

“I think they are going to get it wrong again,” Guedes said, when asked about projections for next year. “They were wrong about the drop (of GDP in 2020) and they will be wrong again about the rise.”

The Minister was annoyed with criticism of the country by “The Economist” British magazine, which in an article this week stated that President Jair Bolsonaro is harming the Brazilian economy and that Guedes contributes to circumventing the spending cap and leading the country “to fiscal incontinence.”

Reference was made to the court-ordered federal debt proposed constitutional amendment (PEC), which alters the spending cap, making room for more spending in the 2022 election year.

The Minister ironically referred to the UK’s economic figures. “The UK must be doing well, there are lines to fill up the tank, there is a meat shortage, GDP fell by 9.7% while we dropped 4%,” he said, in reference to 2020.

“We will grow 5.5% this year and they will grow zero. How can they say that Brazil is doing poorly? The Economist should look at its own navel. Brazil is better off than major economies, but particularly than the UK,” he added.

The Minister also emphasized that inflation is a concern for the government, but stressed that the Central Bank is working to prevent a spread of rising prices. “The fiscal fundamentals are very solid, and the Central Bank is hunting inflation,” he said.

In October, the IPCA (consumer inflation index) stood at 1.25%, the highest variation for the month since 2002. In 12 months, the official inflation accumulates a high of 10.67%.

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