Market underestimates Brazil’s growth potential in 2022, says Guedes

Economy Minister Paulo Guedes believes market experts are underestimating Brazil’s growth potential in 2022, when he predicts GDP will advance more than the 1% predicted by economists, after growing by around 5.5 % this year.

Guedes argues that, despite the pandemic, the country has a strong fiscal base and projects that have already been contracted that foresee R$700 billion in investments for the next few years.

“Next year they continue to make mistakes, underestimating Brazil. I’m not going to say how much we’re going to grow, but, just as they underestimated when we went down, it happens again now,” he told Reuters.

“We have BRL 550 billion already contracted and another BRL 150 billion from the 5G auction that are coming, and this is just the beginning, until the end of the government there will be a lot,” he added, noting that the country has regulatory frameworks that make a viable new wave of investments.

Guedes met this week with CEOs of the biggest French companies based in Brazil and, according to him, the message of the executives was of optimism with the country.

In the last Focus bulletin, however, market projections collected by the Central Bank for GDP growth in 2022 were reduced from 1.20% to 1%, and some institutions already point to growth close to zero and warn of the phenomenon of stagflation.

“I think they’re going to get it wrong again,” Guedes said, when asked about estimates for next year. “They were wrong in the fall (in GDP in 2020) and will be wrong again in the rise.”

The minister was uncomfortable with criticism of the country made by the British magazine “The Economist”, which pointed out in an article this week that President Jair Bolsonaro is bad for the Brazilian economy and that Guedes contributes to the movement to circumvent the spending ceiling and lead the country “to fiscal incontinence”.

The reference was to the PEC dos Precatórios, which changes the ceiling rule, making room for more expenses in the 2022 election year.

The minister mocked the numbers of the UK economy. “The one that must be doing well is England, there is a line to supply a car, there is a shortage of meat, the GDP fell by 9.7% and we fell by 4%”, he said, referring to 2020.

“We are going to grow 5.5% this year and they, nothing. How to say that Brazil is bad? The Economist should look at its navel. Brazil is better than the big economies, but particularly than the United Kingdom”, he added.

In the telephone conversation, the minister also highlighted that inflation is a reason for the government’s attention, but he stressed that the Central Bank is already acting to prevent the spread of high prices.

“Fiscal fundamentals are very strong, and the BC is chasing inflation,” he said.

In October, the IPCA (consumer inflation index) was 1.25%, the biggest change for the month since 2002. In 12 months, official inflation has accumulated high of 10.67%.