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Brazilian economy collapses in the shadow of Covid


“This is the new lost decade, worse than what we had in the 1980s,” says Claudio Considerera, economist and coordinator of the National Accounts Center of the Getulio Vargas Foundation.

After decades of economic prosperity, the oil glut of the 1980s slapped Brazil with skyrocketing foreign debt, a drastically devalued currency and hyperinflation to the tune of over 200%. Over the next decade, Brazilians suffered from wage freezes, skyrocketing food prices and empty market shelves.

After a period of recovery thanks to economic reforms and a more stable democratic government, Brazil plunged back into its longest and deepest recession from 2014 to 2016 under the administration of former President Dilma Rousseff, who was impeached after botched public spending sank the economy and stoked inflation. .

“From there, we could not resume growth, then the pandemic arrived in 2020 and plunged Brazil into an even worse scenario,” adds Considerera.

Jair Bolsonaro’s election in 2019 did little to straighten Brazil’s path to economic growth. Economic reforms, including the privatization of state-run industries, labor and pension reforms, have failed to address soaring unemployment and inflation.

Then the pandemic struck.

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”, hoping to overcome the contagion of Covid-19 without drastic effects on economic activity.

On May 15, 2020, President Bolsonaro gave a press conference declaring that the lockdown measures would be “a path towards [economic] failure.”

Almost a year later, on February 23, he pointed out, “This foreclosure thing, the ‘we’re going to shut everything down,’ is not the right way. It is the path of failure. It will break. Brasil.”

In March, Bolsonaro even asked the Brazilian public prosecutor to file a petition with the country’s Supreme Court to prevent governors and local officials from imposing closures. 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 we never would have thought of, very serious social problems.”

Indeed, many Brazilians have faced severe economic consequences as a result of the pandemic. Nilza Maria da Silva was one of them. Living in the Paraisopolis favela south of Sao Paulo, the 45-year-old woman lost her job as a cleaner when the pandemic began.

Covid-19 has caused one in three deaths in Brazil so far this year

“My bosses were afraid of Covid-19, no one wanted me inside their homes and I had nothing left,” said da Silva, a mother of four.

More than 8.1 million people in Brazil lost their jobs between January 2020 and January 2021. Brazil’s unemployment rate has reached a record 14.7% of its working-age population, according to the Brazilian Institute of geography and statistics (IBGE). This is the highest unemployment rate since the IBGE started tracking in 2012.

But many experts say the economy has in fact been affected by the coronavirus being allowed to spread out of control – and believe Bolsonaro’s government could have avoided some economic pain by doing more to stop the virus.

Thomas Conti, an economist at the Insper Institute and a science communicator for the InfoCovid group that works on publishing scientific information, says the government’s denial, the refusal to adopt lockdown measures and the failure to obtain the first stocks vaccines have created a dangerous sense of uncertainty in the economy.

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

“The role of a government in such a situation is to try to control or mitigate the risks, but it decides to do nothing to tackle the pandemic as if it is going to magically disappear. This has created a feeling of dullness. ‘uncertainty, insecurity and unpredictability. This poses a great risk for entrepreneurs, it pushes companies to lay off staff, it makes people spend less to save, it interrupts investments, “he said. added.

Help, but not enough

In response to the labor market crisis during the pandemic, the main public policy adopted by the Brazilian government has been emergency aid.

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

Brazilian Bolsonaro faces government investigation into his handling of Covid-19

Congress also passed emergency aid requiring government support for those hardest hit by the pandemic, with a program that paid five monthly installments equivalent to $ 110 per eligible recipient between April and August 2020, and four installments. from 50 USD between September and December.

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

Da Silva says government assistance was just enough for her family to get by in 2020. However, government assistance has declined since 2021 and she has had to rely on neighbors and local associations to support herself.

“I didn’t go hungry because the Paraisopolis community is very organized and helped me with the food, because everything is very expensive now. mentionned.

And not all communities in Brazil are as useful as Paraisopolis. Research conducted by the Brazilian Food and Nutrition Sovereignty and Security Research Network found that more than half of Brazil’s population, 116 million people, did not have full and permanent access to food. ‘last year.

A Covid-19 field hospital moved into the Pedro Dell'Antonia sports complex on May 17, 2021 in Santo Andre, Brazil.

Businesses shun Bolsonaro’s approach

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

“This recession, and its negative social consequences, will only be overcome when the pandemic is brought under control by competent action by the federal government. This government has under-utilized or abused the resources at its disposal, notably by ignoring or neglecting scientific evidence in the design of actions. to deal with the pandemic, ”says the letter, which calls for faster vaccinations, more masks, economic aid and a nationwide lockdown if needed.

Brazil continues to rank second in Covid-19 deaths among countries around the world. As the daily death rate has risen from its peak of 4,000 average daily deaths to around 2.00, cases and deaths are slowly increasing again. A spike in infections in 2021 brought down the health care system in Brazil’s 27 states, with just 9.2% of the population fully immune.

Many state and local authorities have rejected the federal government’s laissez-faire approach. The Secretariats of State for Health have created crisis committees and phase restrictions related to infection rates and intensive care bed capacity. In the northeast of the country, one of Brazil’s poorest regions, governors have created a consortium to negotiate vaccine purchases themselves.

But Bolsonaro has lashed out at those who opposed the federal government’s plans, blaming their restrictions on the country’s continued economic downfall. Meanwhile, he urged Brazilians to resist pandemic containment measures, such as local stay-at-home rules. In March, at a groundbreaking event for the railroad, Bolsonaro told the crowd to “stop being sissies and whining.”

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

“We have no idea what’s going to happen. But we do know that we need to at least vaccinate people so that we can start living normal lives,” the economist told CNN. “By then we can calculate all the effects. But for that to happen, there has to be a leader who takes us in that direction, who does the least to fight the pandemic.”



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