June 2019 Brazil Risk is High / by Mark Langevin

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The June 2019 Brazil Risk Score Is 4: Represents High Country Risk

·       Misery Index/Stable Performance

·       Formal Employment Index/Stable Performance

·       Economic Activity Index/Poor Performance

·       Homicide Rate/Stable Performance

·       Presidential Approval/Stable Performance

The June 2019 Brazil Risk Score of 4 represents a one-point increase from the May score due to low inflation’s contribution to the Misery Index, stable formal employment creation, stable homicide numbers, and stable presidential approval. The misery rate is stable behind very low inflation coupled to high but stable unemployment rates. After a modest adjustment of the March monthly homicide rate, the most recent measure reported, April 2019, is stable and continues below the high rates measured in 2018.  The Central Bank’s Economic Activity Index reports the most recent measure, again for April 2019, with a consecutive slight decline, further reflecting the possibility that the economy may have contracted in the first quarter of 2019.  Last, the June 27 CNI/Ibope presidential approval public opinion poll shows stable presidential approval even though it appears that the rejection rate is inching up over 30% and now registers 32%. Taken together, the excellent and regular ratings remain above 60% and register 64% in this recent poll. While some news outlets emphasize the gradual uptick in President Jair Bolsonaro’s rejection rate, the combined measure of excellent and regular provides a better benchmark for comparative historical purposes. While we expect the rejection rate to continue to show modest increases, the challenge for the president is to stay above 50% for the long run.

Overall, Brazil’s high-risk stems from high unemployment and contracting economic activity.

President Bolsonaro’s emphasis on fighting crime provides him with some reason to cheer the lower monthly homicide rates as compared with the 2018 average of 1.90 homicides per 100,000. Although it should be noted that the trend of falling homicides (although they remain very high in comparative perspective) began in the second half of 2018, well before the new government took office. Also, the president’s approval will likely vary in tandem with economic performance. At this point, it is likely that presidential approval will continue to fall in the second half of 2019 given the dismal performance of the economy and widespread unemployment.

The score of 4, HIGH, brings the BrazilWorks Brazil Risk score just below the average since the inauguration of President Jair Bolsonaro and his administration. The average for January to June 2019 is 4.6%.