BRASILIA.— Vaunted as the end of the recession by President Michel Temer, the modest growth in Brazil’s Gross Domestic Product (GDP) in the first quarter of 2017 was described by economists as chicken feed.
“Brazil is growing again. And with the reforms it will grow even more,” Temer posted on social media after a report from the Brazilian Institute of Geography and Statistics (IBGE) showed a 1% increase in GDP for the January-March quarter with respect to the last quarter of 2016.
In the same euphoric tone, Finance Minister Henrique Meirelles – who just a few days before was bemoaning an exaggerated climate of pessimism regarding the country’s economy – described the announcement as “historic,” despite admitting that “there is still a way to go to achieve full economic recovery.”
Referring to this first increase in GDP following two years of continuous decline, experts at the Inter-Union Department of Statistics and Socio-Economic Studies (DIEESE) warned that when compared to the same period last year, GDP had actually decreased by 0.4%, while the accumulated fall over the past 12 months is 2.3%.
In a press release, DIEESE explained that the growth reported in the first quarter of the year had a greater relation to external factors, such as exports and the rising prices of certain commodities, than domestic economic policy measures.
On the contrary, it pointed out, indicators such as gross fixed capital formation, which measure investment in machinery and new industrial facilities, showed a fall in the period in question, which testifies to the fragility of the Brazilian economy.
Economist and professor of the University of Campinas (Unicamp) Marcio Pochmann agreed, noting that the crisis continues and everything indicates that the pace of economic downturn merely slowed, due to isolated and external factors.
Without effective measures for recovery, given the current scenario, the figures celebrated by Temer could be just one point off the curve of a prolonged recession, the former president of the Institute for Applied Economic Research (IPEA) told Brazilian daily Brasil de Fato.
For Brazil’s working class, the recession continues to hit hard, as unemployment increases and wages remain stagnant, Pochmann stressed. He insisted that latest statistics come not as a result of the policies of the Temer government, but of the expansion of foreign trade, which since 2015 has been produced by the devaluation of the country’s currency.
Meanwhile, Joao Sicsú, professor of the Federal University of Rio de Janeiro (UFRJ), agreed that the quarterly result was driven by external demand; a factor that he stressed no government can control.
The sectors that saw growth, such as agriculture, transportation, and warehousing, are all linked to external activity, while on the other hand the domestic market, household consumption and investments, all declined, he noted.
Sicsú highlighted that in fact the country is experiencing a long course of decline, noting that since the last quarter of 2014, domestic consumption has fallen by approximately 10%, while investments have fallen by 24 percentage points.
There is no consistent path to recovery, nor any indication of improvement, the expert stressed, for whom the Brazilian economy simply “sighed” in the first three months of the year “despite the government and not because of it.”
A single quarter does not set a trend, Mauro Rochlin, a professor of Macroeconomics at the Getulio Vargas Foundation (FGV) in Rio de Janeiro, told reporters, noting that for the time being it is difficult to say whether any sector has been altered structurally.
However, Rochlin expressed his belief that certain indicators seem to indicate a trend toward recovery, although on a very limited basis.
According to the National President of Brazil’s Central Workers’ Union (CUT), Vagner Freitas, Temer’s fanfare regarding quarterly GDP growth is no more than a wistful attempt to impose a positive result on his administration’s balance sheet, at a time when his departure from the presidential palace appears imminent.
He stressed that Temer has no idea of the reality, the needs, and much less the suffering of ordinary Brazilians, who during his government have lost their jobs and seen their living conditions worsen.
A country with more than 14.5 million unemployed, including 2.6 million in just a year of Temer’s administration, has nothing to celebrate. Brazil is at a standstill, companies are closing up shop. It is not possible to turn political, economic, and moral defeats into victory through a financial spreadsheet, Freitas insisted. (PL)