The economic crisis is still raging in Brazil, but the Brazilian Government has been trying to launch measures to limit the effects thereof. However, some segments of the economy do not seem to have felt the impact of this scenario so much, so far.
One of the most evident effects of the financial instability has been the foreign exchange issue, with the United States Dollar having maintained an exchange rate of about 4 Brazilian Reais (BRL) to the dollar. As a result, the segment of imported goods and international tourism (Brazilians wishing to travel abroad) have suffered a lot, due to increased costs.
Arrival of foreign tourists should increase
In contrast to the dire prospects of international tourism, the segment of internal tourism (within Brazil) has a lot to commemorate, as the strength of foreign currency makes Brazil an even more attractive destination for foreign tourists, who see their budgets quoted in United States Dollars multiply by four as soon as they step off the plane at the Brazilian airport. Thus, the prospects suggest optimism in this segment during the month of January, even more so as Carnival shall take place in early February, when the summer will just have started in Brazilian territory. And this is not even considering the Olympic Games to be held in Rio de Janeiro.
In order to control the economic crisis, the Brazilian Government has made many expense cuts and also resuscitated another tax, the Temporary Contribution on Financial Operations (CPMF). This tax has not yet officially been created but it is expected that it shall rake in an additional BRL 24 billion to the Government coffers in 2016 alone.
Planning includes public works and support to small businesses
The Federal Pluriannual Plan (PPU), which lays out public actions to be taken between 2016 and 2019, is also being discussed between the executive and legislative spheres. Among the proposals that are present is the continuity of the Growth Acceleration Plan (PAC), which is responsible for keeping the economy active with Government projects in the civil construction area.
A programme of incentives to the national economy shall also be unveiled in February, including the sanitation area and support to small and medium businesses. Even so, the forecast are that the Gross Domestic Product (GDP) shall continue to fall in 2016 – the forecast now stands at 1.9% – while the official inflation forecast for next year is 6.47%.
Even so, there is still a lot to be done, as a general feeling of optimism is still a long way from returning to Brazil. One of the main concerns is still the loss of investment grade status. The assessment as a “good payer” was removed from the country by two of the three important credit rating agencies: Fitch and Standard & Poor’s (S&P). Moody’s has kept the Brazilian mark as that of investment grade, but are currently reviewing the situation, with a view to possible demotion of Brazil.
This loss of investment status means that there is a reduction in the number of investors interested in putting their funds into Brazil, making it more difficult for credit to enter in favour of Brazilian businesspeople and leading to increased exchange rates. This means that the approval of plans such as the PPU come at a good time and are used as tools to show the measures that the country has been taking to regain control of the country’s economy.