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Experts analyze the direction of the Brazilian economy and the steps needed to overcome the fiscal impasse and unlock the country's growth potential.
Brazil is going through a challenging economic period. With Lula’s government in its third term in office, issues such as the dollar, interest rates and fiscal adjustment are at the center of the debate. While some believe that the country has potential for growth, others point out that, without solving the fiscal problem, the scenario will continue to be complicated. During a recent event promoted by Mirae Asset, experts highlighted the challenges and possible paths for the future of Brazil.
The fiscal problem? A knot to untie
According to Walter Maciel, CEO of AZ Quest, Brazil's biggest challenge today is fiscal. "Lula found a country that has only one problem: fiscal. But it is a serious problem," said the executive. For him, the measures adopted by the current government, such as increasing the minimum wage above inflation and exempting income tax for those who earn up to R$5, have not helped to improve the situation.
The market expected Lula to adopt a more moderate stance, but so far, the decisions made have not met expectations. In Maciel's view, public spending is being prioritized without due attention to fiscal adjustment, which could keep Brazil in an economic scenario of uncertainty until 2026.
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Expert sees a potential scenario
Despite the criticism, Maciel believes that Brazil has the potential to transform itself in the coming years. He argues that if the government were to achieve a fiscal adjustment of 1,5% of GDP, the impact would be significant.
“If this happens, the dollar could fall to R$4 or less, the stock market could reach 200 points, and the Interest fall to 8,5%,” he explained. This optimistic view reflects Brazil’s potential to attract investment and strengthen its economy, but it depends directly on structural and political changes that promote fiscal responsibility.
The role of credit and the real
Despite the challenging scenario, Maciel highlighted that private credit in Brazil, especially for companies with good financial health, remains resilient. In addition, the real has shown an interesting carry in relation to other currencies, which may attract foreign investors.
“I don’t believe in bankruptcy. We have healthy private credit, and the real should gain strength against other currencies,” he said.
Comparison with Europe and the United States
As Brazil faces its own challenges, the global economic scenario also has its peculiarities. In Europe, economies such as France and Germany, which have always been growth engines, are facing difficulties. According to Daniel Celano, from Schroders in Brazil, the European bloc is expected to grow only 1% with inflation of 2%, while facing competition from China and resilient inflation in the services sector.
In the United States, the scenario is different. Daniel Popovich, from Franklin Templeton, stated that the American economy is in a more favorable position, with a strong buy recommendation. However, there are risks, such as the possibility of increased government spending with the return of Donald Trump to the White House.
And Brazil until 2026?
In Maciel's analysis, the Brazilian economic scenario is unlikely to change drastically in the coming years, unless the government adopts a more proactive stance. He believes that, with a possible change of power in 2026, the chances of resolving the fiscal problem may increase.
“Today, the government only reacts when the situation worsens. From 2026 onwards, I believe we will have a greater chance of more concrete solutions for fiscal adjustment,” he said.
How do the dollar and interest rates come into play?
The relationship between fiscal adjustment, the dollar and interest rates is direct. Without solving the fiscal problem, the dollar tends to remain at high levels, impacting import prices and putting pressure on inflation. Interest rates, which are currently at high levels, make access to credit difficult and slow economic growth.
On the other hand, an effective fiscal adjustment could strengthen the real, reduce the dollar and open up room for interest rate cuts. This, in turn, would boost growth and make Brazil more attractive to foreign investors.
A Brazil with potential?
Brazil’s economic future depends on strategic decisions in the short and medium term. With a solid fiscal adjustment, the country has the potential to reduce the dollar, control interest rates and create a more favorable environment for growth.
For now, Lula’s government faces criticism for its lack of focus on fiscal responsibility, but that could change with a more structured approach. In the meantime, investors and experts remain vigilant, waiting for clear signs that Brazil is ready to unlock its true economic potential.
