Brazil elections: What's in store for Latin America's largest economy?
In our latest insight piece, we look at the economic implications of the upcoming Brazil elections.
Strengthening ties with the West would also be a priority; under Bolsonaro tensions with the U.S. and EU have risen due to deforestation in the Amazon and the current president’s clashes with the judiciary. However, the ratification of the EU-MERCOSUR trade deal could still be scuppered by Lula’s protectionist leanings.
In contrast, a second Bolsonaro term would be marked by a smaller state than under Lula, with a renewed push for privatization. However, Bolsonaro has also pledged elevated social handouts, which—as with Lula’s plans—could lead to investor concerns over the fiscal deficit and public debt.
Whoever wins the election will have to contend with a highly fractured parliament, which will impede radical policy shifts. This political paralysis is part of the reason behind our analysts’ pessimistic GDP forecasts for Brazil: The country is expected to grow at one of the weakest rates in Latin America out to 2026. Moreover, the public debt-to-GDP ratio is seen rising over the next few years, which will keep investors’ nerves on edge. In a nutshell: A lackluster economic performance is in store for Brazil, whoever wins the elections.
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Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.
Author: Oliver Reynolds, Economist
Date: September 16, 2022
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