CNN Brasil: 11/24/2022
According to Andrea Damico, partner and chief economist at Armor Capital, the still high interest rate scenario in the first half of the year is a consequence of Lula’s speeches regarding a no fiscal policy prioritization, opening room to an expansionist social policy. It is also related to the extra-spending amount proposed by the Transition PEC (Constitutional Amendment Proposal).
Besides, there is uncertainty about who will be the next Finance Minister, which also impacts the economic outlook.
To Damico, Brazil is facing the opposite situation of other emerging economies, which have observed currencies appreciation and market interest rates drop. “We do not see that here due to the domestic higher risks, related to political decisions”, says Damico.
The undefined period for extra-cap expenditure also affects market prices. However, the approval is also uncertain. “The transition team’s intentions regarding this PEC also negatively affect markets, although the text may be modified ahead, because show their plans of more spending, being more distant of the fiscal responsibility expected by the market.”
