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ANALYSIS | Brazil’s economy collapses in the shadow of covid-19


May 28, 2021

(CNN) – The covid-19 crisis has claimed more than 450,000 lives in Brazil and ruined the livelihoods of many more. Brazilians are facing one of the worst economic recessions in the country’s history. Millions remain unemployed, inflation is rising, countless businesses are collapsing, and people are starving.

“It is the new lost decade, worse than that of the 80s”, says Claudio Considera, economist and coordinator of the Center for National Accounts of the Getulio Vargas Foundation.

After several decades of economic prosperity, the oil glut of the 1980s slapped Brazil in the face with dizzying foreign debt, a drastically devalued currency, and hyperinflation of more than 200%. Over the next decade, Brazilians suffered wage freezes, skyrocketing food prices and empty shelves.

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After a period of recovery thanks to economic reforms and a more stable democratic government, Brazil once again plunged into its longest and deepest recession from 2014 to 2016 under the administration of former President Dilma Rousseff, who was impeached after that failed public spending would sink the economy and fuel inflation.

“From then on we could not recover growth, and then the pandemic arrived in 2020 and threw Brazil into an even worse scenario,” adds Considera.

The election of Jair Bolsonaro in 2019 did little to set Brazil’s path towards economic growth. Economic reforms, including the privatization of state industries, labor and pension reforms, failed to remedy rampant unemployment and inflation.

Then the pandemic hit.

Avoid restrictions ‘at all costs’

Since the arrival of COVID-19 in Brazil, the federal government has followed a policy of firmly avoiding restrictions “at all costs”, in the hope of overcoming the contagion of COVID-19 without drastic effects on economic activity.

On May 15, 2020, President Bolsonaro gave a press conference in which he declared that the confinement measures would be “a path to failure. [económico]».

Almost a year later, on February 23, he emphasized: «This history of confinement, the ‘we are going to close everything’, is not the way. This is the road to failure. It will bankrupt Brazil.

In March, Bolsonaro even asked the Brazilian prosecutor to submit a request to the country’s Supreme Court to prevent governors and local officials from imposing blockades. When the court dismissed the case, Bolsonaro told his supporters that “chaos is coming. Hunger will push people out of their homes, we will have problems that we never expected, very serious social problems.

In fact, many Brazilians have faced dire economic consequences due to the pandemic. Nilza Maria da Silva was one of them. Living in the Paraisopolis favela in southern Sao Paulo, the 45-year-old lost her cleaning job as soon as the pandemic began.

“My bosses were afraid of COVID-19, nobody wanted me inside their houses and I was left with nothing,” said da Silva, a mother of four.

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More than 8.1 million people in Brazil lost their jobs between January 2020 and January 2021. The unemployment rate in Brazil reached a record 14.7% of its working-age population, according to the Brazilian Institute of Geography and Statistics (IBGE). It is the highest unemployment rate since IBGE began monitoring in 2012.

But many experts say that the economy was really hurt by the fact that the coronavirus was allowed to spread uncontrollably, and they believe that the Bolsonaro government could have avoided some of the economic damage by making a greater effort to stop the virus. .

Thomas Conti, an economist at the Insper Institute and a scientific communicator for the InfoCovid group who works on the publication of scientific information, says that the government’s rejection, the refusal to adopt containment measures and the inability to obtain early vaccine stocks created a dangerous feeling of uncertainty in the country’s economy.

“When a pandemic of this magnitude occurs, the economy will take a hit even if nothing shuts down. People are affected by risk. When people understand that they are at risk, that they can lose their lives or the lives of their loved ones, they change habits, avoid exposing themselves, regardless of the measures, ”said Conti.

“The role of a government in such a situation is to try to control or mitigate the risks, but they decide to do nothing to combat the pandemic as if it were going to magically disappear. That created a sense of uncertainty, insecurity, and unpredictability. This poses a great risk for entrepreneurs, causes companies to lay off staff, makes people spend less to save, stops investments, “he added.

Help, but not enough

In reaction to the labor market crisis during the pandemic, the main public policy adopted by the Brazilian government was emergency aid.

The federal government offered a line of credit to small businesses affected by the pandemic, although the aid only reached a small portion of Brazilian businesses and offering loans instead of handouts proved risky for many business owners. As a result, tens of thousands of retail stores closed in 2020.

Congress also approved emergency aid that requires government support for those most affected by the pandemic, with a program that paid five monthly installments equivalent to $ 110 per qualified beneficiary between April and August 2020, and four installments of 50 dollars between September and December.

Almost 70 million Brazilians benefited from the program, according to the Ministry of Economy.

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Da Silva says the government aid was enough for his family to get by in 2020. However, government aid has decreased since 2021, and he has relied on neighbors and local associations for his livelihood.

«I did not go hungry because the Paraisopolis community is very organized and it helped me with food, because now everything is very expensive. But there were times when I didn’t have money to buy gas for cooking and had to use firewood, ”he said.

And not all communities in Brazil are as attentive as Paraisopolis. An investigation conducted by the Brazilian Network for Research on Food and Nutrition Sovereignty and Security found that more than half of the Brazilian population – 116 million people – did not have full and permanent access to food last year.

Companies reject Bolsonaro’s approach

Today, even the financial sector, which has supported Bolsonaro since the beginning of his administration, has grown weary of his approach. In a letter signed by more than 1,500 economists, bankers, businessmen and former ministers they criticized the government’s pandemic response and emphasized the need to control the virus to save the Brazilian economy.

“This recession, as well as its damaging social consequences, will not be overcome until the pandemic is controlled by action by the competent federal government. This government underutilized or misused the resources at its disposal, even ignoring or neglecting the scientific evidence when designing actions to face the pandemic, “says the letter, which calls for more vaccines, more use of masks, financial aid and a nationwide shutdown if necessary.

Brazil continues to rank second in terms of deaths from covid-19 among countries globally. While the daily death rate has dropped from its peak of 4,000 average daily deaths to about 2,000, cases and deaths are slowly increasing again. An increase in infections in 2021 brought down the health system in all 27 Brazilian states, with only 9.2% of the population fully immunized.

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Many state and local authorities have rejected the federal government’s laissez-faire approach. The state health secretariats created crisis committees and restriction phases linked to infection rates and the capacity of ICU beds. In the northeast of the country, one of the poorest regions of Brazil, the governors created a consortium to negotiate the purchase of vaccines on their own.

But Bolsonaro has lashed out at those who opposed the federal government’s plans, blaming his restrictions for the country’s continued economic decline. Meanwhile, he has urged Brazilians to resist measures to contain the pandemic, such as local containment regulations. In March, during a railroad opening event, Bolsonaro told the crowd to “stop being sea ***** and whining.”

As vaccines increase around the world, the global economy is slowly recovering. But Brazil’s economic well-being remains, at least partially, tangled up with its health crisis, which is still spiraling, with local transmission rates rising, the rise of new variants and vaccines at a slow pace.

We have no idea what will happen. But we know that we have to at least vaccinate people so that we can start living a normal life, “the economist told CNN Considera. ‘By then we can calculate the full effects. But for this to happen, there must be a leader who takes us in that direction, who does the minimum to combat the pandemic.

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