Brazil News: Economy Under Bolsonaro Faces Slowdown?

Jair Bolsonaro was elected president of Brazil amid promises of strengthening the economy but so far the economy has been slow and the forecast is for a growth of just 1.23% in 2019, which is a little more than it did the past two years.

A Reuters poll of economists published on Tuesday showed that the Brazilian economy has contracted in the first quarter of the year, the first time since 2016.

An unemployment rate of 12.7%, high credit rates and public uncertainty surrounding Bolsonaro's pension reform proposal are just a few of the reasons behind the country's economic woes. The Reuters poll estimated that Brazil's economic performance in the first quarter of 2019 was between -1.4% and +0.2% of the country's Gross Domestic Product (GDP).

Many analysts and economists have pointed to Brazil's pension system as one of the main issues that stifle the economy, as there have been struggles to save $260 billion in much-needed pension reforms.

"The key reason for a slower economic recovery is the significant delay in the pension reform approval and a high risk for a dilution of the proposals," Bank of America Merrill Lynch economists wrote about Brazil's stalled economic revival.

Brazil's economic minister, Paulo Guedes, is extremely concerned about Brazil's lack of progress on pension reform and said last week that if the reform was weakened down too much or faces staunch opposition, he would "get on a plane and go live abroad."

The International Monetary Fund said last Friday that pension reform was a "crucial step," but that further measures would be needed to reduce the debt burden and reform the Brazilian economy.

Some Brazilians, particularly civil servants and government workers, are retiring in their early 50's and receive handsome retirement benefits. Bolsonaro fears that this would bankrupt the country.

Meanwhile, there is growing impatience for Bolsonaro. The Guardian reported that the conservative Estado de São Paulo newspaper on Sunday said support for the right-wing leader “was melting away before our eyes,” while noting that about 36% of voters consider his administration "bad or awful," compared to just 17% in February.