Crisis begins to abate, says institute

27 de junho de 2016

Brazil’s Institute of Applied Economic Research (Ipea) reports that there are signs of improvement, but the path to recovery will be a long one.

Rio de Janeiro – A survey released this Monday (27) by the Institute of Applied Economic Research (Ipea) indicates that the crisis in the country is starting to lose steam. Nevertheless, the path to recovery is a long one, says the coordinator of Ipea’s Conjuncture Group José Ronaldo Souza Júnior. Entitled Carta de Conjuntura, the survey draws on economy-related data released by the Brazilian Institute of Geography and Statistics (IBGE).

The Ipea claims the most noticeable signs that the crisis is winding down are seen in Brazilian industry, according to which the weakening of Brazil’s real relative to the US dollar is beneficial to Brazilian exporters, particularly in textiles, wood products and footwear.

Besides making Brazilian goods more competitive internationally, the falling real is also encouraging intermediate goods producers to replace imports with domestic-made products. On a negative note, the weaker national currency makes the importation of machinery and equipment more expensive, thereby leading to a slowdown in investment in production.

Unlike industry, services and retail are yet to rebound. “Services tend to take longer to recover because here, consumer income plays a big role, and it will be a while before that income recovers because of the employment rate issue,” Souza Júnior explained.

*Translated by Gabriel Pomerancblum