Brazil Risk Remains High / by Mark Langevin

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The May 2019 Brazil Risk Score Is 3: Represents High Country Risk

·       Misery Index/Stable Performance

·       Formal Employment Index/Stable Performance

·       Economic Activity Index/Poor Performance

·       Homicide Rate/Stable Performance

·       Presidential Approval/Poor Performance

The May 2019 Brazil Risk Score of 3 represents a one point decline from the April due to the slight dip in economic activity, the reported possibility of recession, and further dive in presidential approval. The misery rate is stable behind very low inflation coupled to high but stable unemployment rates. The monthly homicide rate increased but remains stable and below the high rates measured in 2018. The Central Bank’s Economic Activity Index reports the March measure with a slight decline and reports indicate that the economy may have contracted in the first quarter of 2019. Last, the presidential approval rating, as measured by XP Investimentos/Ipesp, has declined from 67 to 60 (combining both excellent and regular ratings) during the month of May. For now we score approval as poor with a continued negative outlook. Overall, the HIGH Brazil Risk score under the newly installed government of President Jair Bolsonaro reflects the continuation of high unemployment and a sagging economy. At this juncture, the slow economic recovery poses the most formidable challenge to the new government. However, it should be noted that the government’s recent efforts to obtain a “governing” agreement with Chamber of Deputies President Rodrigo Maia and Supreme Court President Dias Toffoli may accelerate congressional approval of President Jair Bolsonaro’s reform agenda in the coming weeks. The “pact for growth” could arrest the president’s falling popularity and raise the confidence of fickle investors.

The score of 3, HIGH, brings the BrazilWorks Brazil Risk score below the average since July 2018 and represents a downgrade from the April 2019 HIGH score of 4. The series mean average since July 2018 is 4.63.

Brazil Risk Score, July 2018 to May 2019