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Brazil Country Risk Report Q1 2019

Brazil Country Risk Report Q1 2019

Right-wing populist Jair Bolsonaro is the candidate most likely to win Brazil's Presidency in a second round on October 28 against a leftist, Fernando Haddad

Bolsonaro victory would likely support a short-term boost in Brazilian financial assets and economic activity, though he would likely under-deliver on market expectations for economic reforms

The election is likely to be extremely close, and in any scenario, assembling a legislative coalition is likely to be a hurdle to major policy reforms Moreover, the public's broad and deep distrust of the political establishment will likely leave the next administration with limited political capital

The election of a leftist president would likely lead to significant uncertainty over policy direction, weighing on economic activity heading into 2019

On the upside, a more supportive policymaking environment than currently anticipated could bolster investment and drive more robust growth over the medium term

The Banco Central do Brasil (BCB) will hike its benchmark Selic interest rate to 8 00%, from 6 50% currently, by end-2019 The bank will most likely begin rate hikes in 2019, although an earlier and more aggressive hiking cycle could be prompted by financial market volatility in the wake of the October general election

Over the coming decade, Brazil will only experience modest levels of growth as structural headwinds limit any quick economic solutions to the challenges faced from falling global commodity prices


Executive Summary
Core Views
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Brazil Election Generates Significant Risks To Growth
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Brazil's External Accounts Stable Despite Outflow Risks
Outlook On External Position
TABLE: FINANCIAL ACCOUNT INDICATORS
TABLE: TOP 5 GOODS IMPORTS IN 2017
TABLE: TOP 5 GOODS EXPORTS IN 2017
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Rate Hikes In The Pipeline For Brazil
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Brazil's Fiscal Outlook Will Remain Source Of Uncertainty
Brazil Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsStructural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN AREAS OF REVENUE AND EXPENDITURE (2015)
Currency Forecast
BRL: Neutral Outlook Once Election Has Passed
TABLE: CURRENCY FORECAST
10-Year Forecast
The Brazilian Economy To 2027
Days Of Easy Growth Are Gone
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Brazil Elections: Bolsonaro Most Likely To Win In Close Election
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Leaders Will Struggle With Slower Growth
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Contagion Risks Limited To EMs For Now
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: BRAZIL – MACROECONOMIC DATA & FORECASTS

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