By Ipea and Conab

In this Outlook edition, the economic analysis team of Ipea’s Directorate for Macroeconomic Policies and Studies (Dimac) together with Conab’s Directorate for Agricultural Policy and Information (Dipai) present estimates for the Brazilian agricultural GDP for 2020 and 2021. This edition employs the harvest estimates released by the Brazilian Institute for Geography and Statistics (IBGE) and by the National Company for Supply (Conab). This Outlook1 also includes cultivated area and production estimates for soybean, corn and wheat for the 2019-2020 harvest, together with an overview of the world’s largest producers and consumers of those grains.

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By Ana Cecília Kreter, Fabio Servo, Ana Cecília Almeida e José Ronaldo de C. Souza Júnior

Meat exports – beef, pork and chicken – had a cumulative growth of 10% compared to the same period last year (table 1). Among the main destinations, beef and pork exports to China (116% and 137% increase, respectively) account for a lot of this overall growth. This increase in exports happened because: a) the African swine fever (ASF) decreased China’s pork production; b) the USA-China trade war decreased American commodities exports; c) more recently, the Covid-19 pandemic. The Asian bloc (not including China) exhibited a moderate overall growth of 6%, whereas having a 10% decrease in chicken imports. Compared to last year, the European Union and the Middle East bought less meat from Brazil in 2020 – except for pork exports to the Middle East, which grew 38%.

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By Alexandre Samy de Castro and Bruno Filomeno da Rocha

This paper presents data on business startups and shutdowns in the state of São Paulo, in the seven weeks follwing the start of the social distancing measures in the state – between March 18 and May 5, 2020. The data reveals plummeting startups and shutdowns, in the order of 72% and 93% respectively. Likewise, the opening and closing of branches declined sharply, both by 73%. Disaggregating the data by economic activity, we observed significant differences in business startups: the sectors of information and communication (-55%), human health (-59%) and professional, scientific and technical activities (-65%) exhibited less severe declines compared to the aggregate average. On the other hand, the sectors of arts, culture, sports and recreation (-83%), other service activities (-83%), construction (-80%) and accommodation and food (-80%) stood out, with declines significantly larger than the average.

Despite the slump in business startups, still nearly 8,000 firms were established in the state of Sao Paulo after the beginning of the pandemic. Retail trade, clothing, footwear, fabrics, bedding, lighting and appliances significantly reduced their share in startups, while computer and telecom equipment and and liquefied petroleum gas (cylinders) increased. In office service activities, the organization of events contracted alongside with a relative expansion in administrative support and services. In wholesale trade, machinery, equipment (excluding information and communication technologies), lost to other segments, such as food and agricultural inputs. In land transport, the passenger (cargo) segment exhibited a sharp, relative drop (increase). The highlight of the data is the relative strength of entrepreneurship in professional, scientific and technical activities and financial services, with emphasis on advertising, business management consulting, architectural and engineering services and accounting/auditing activities. ​

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By Ana Cecília Kreter, José Ronaldo de C. Souza Júnior , Pedro Mendes Garcia, Guilherme Soria Bastos Filho, Sérgio De Zen and Cleverton Tiago Carneiro de Santana

In this Outlook edition, the Economic Analysis Group of Ipea’s Directorate for Macroeconomic Policies and Studies (Dimac) together with Conab’s Directorate for Agricultural Policy and Information (Dipai) present estimates for the Brazilian agricultural GDP of 2020. This edition1 is based on the harvest estimates released by the Brazilian Institute for Geography and Statistics (IBGE) and by the National Company for Supply (Conab). Along with the baseline scenario, this Outlook includes an “adverse scenario” (i.e. under-stress scenario) analysis in which the agricultural production is affected by adversities such as the COVID-19 pandemic.

Brazilian Agricultural Outlook

Brazilian Agricultural Outlook – Português 

By Ana Cecília Kreter, José Ronaldo de C. Souza Júnior , Guilherme Soria Bastos Filho and Cleverton Tiago Carneiro de Santana

From this publication on, Ipea, in partnership with Conab, has begun the conjunctural analysis of the Brazilian agricultural sector designed for those institutions who are abroad: the Brazilian Agricultural Outlook. Besides being a sector of great relevance to the country’s economy, Brazil is one of the main players in the world agricultural market. Thus, the information produced by both institutions becomes essential to understand and forecast trends in the agricultural sector.

In this edition we present the forecast and estimate of the Agricultural GDP, as well as the area and production estimates of the main grains – soybean, corn and wheat – for 2018/2019 and, in part, for 2019/2020.

This partnership’s aim is to help disseminate information in order to improve the understanding of public and private actors, as well as the academic public as a whole.

Brazilian Agricultural Outlook

Brazilian Agricultural Outlook – Português 

By Alexandre S. de Castro, Augusto C. Romeiro and Marco Antônio F. H. Cavalcanti

This technical note presents a novel set of indicators on the conditions of credit markets in Brazil, based on judiciary records obtained from official gazettes published by the state court of Sao Paulo – the Tribunal de Justiça do Estado de São Paulo. These indicators are computed with a relatively short publication lag, of less than ten days from the end of the reference period.

This set of judicial indicators reflects the volume and the economic value of ju­dicial disputes related to delinquency and default on loans as well as breaching of civil contracts: foreclosure of debt instruments, monition actions, evictions and search and seizure in fiduciary liens.

The indicators comprise the majority of credit instruments available in the market, issued both by financial and non-financial creditors. They also include the following case classes: search and seizure in fiduciary liens – typical of credits towards durable goods (mainly motor vehicles); evictions, which result from default on lease agreements; and business reorganizations (analogous to the Chapter 11 in the United States). Overall, this group of judicial claims is closely related to the degree of insolvency of both firms and households.

The construction of a panel of judicial indicators is based on a system developed at IPEA, denominated IPEAJUS. This system identifies judicial cases on oficial gazettes (or other sources), automatically extracts case information on the websites of the courts and codifies non-structured information such as litigant “types” and judicial decisions. The core of the system is a relational, PostGRESQL database, designed to host all the case data that is extracted from the courts.

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By Estêvão Kopschitz X. Bastos and Rodrigo Mendes Pereira

There has been a gradual improvement of credit conditions in the economy, but with significant discrepancies between non-earmarked and earmarked credit, between individuals or corporations and between state-owned or private banks.

The largest expansions are taking place with non-earmarked resources, credit to households and coming from private institutions. Non-performing loans (NPLs) rates with non-earmarked loans have reached historically low levels, both for households and firms. The ratio of interest and amortization payments to household budgets has been relatively stable in the last months. Non-mortgage indebtedness for households has grown moderately, whereas mortgages remain mostly stable, around the mean level of the last three years. Interest rates and average spreads remained stable in September, after an eighteen-month period of decline.

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By José Ronaldo de Castro S. Júnior, Paulo Mansur Levy, Marco Antônio F. de H. Cavalcanti and Christian Vonbun

The performance of the Brazilian economy in the third quarter of 2018 was affected by an increasing instability in the financial markets, combined with a sluggish recovery in economic activity. The forecast of GDP growth accelerated to 1.1% qoqsa, but it must be taken into account that it happened immediately after a severe supply shock due to the truck drivers’ strike, making the basis of comparison a weak one.

The increasing instability is due to several domestic and external motives. On the external front, the economic landscape is becoming less favorable to emerging economies, mainly due to United States’ monetary policy normalization, as well as to devaluation episodes in Argentina and Turkey, increasing the perception of risk in the international markets.

On the domestic front, electoral uncertainties and the deeply unbalanced fiscal stance is spurring heightened risk premia and stark financial conditions. This is negatively affecting consumption and investment decisions by economic agents.

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By José Ronaldo de Castro S. Júnior, Ana Cecília Kreter and Jefferson Staduto

On July 6th, the Brazilian Institute of Geography and Statistics (IBGE) published the Broad National Consumer Price Index (IPCA) for the month of June. The agricultural sector, which has recently been contributing greatly to the stability of the IPCA, ended up being one of those responsible for its largest monthly increase since 1995.

In fact, this sector has been playing an increasingly strategic role in the Brazilian economy. Given its critical contribution both to the internal demand for food and raw materials and in terms of the Trade Balance, the sector has had a significant impact on international trade and on the level of economic activity, and is most likely to continue to do so in future. There is also a direct relation between the price of agricultural products and inflation. The “food and beverages” group is responsible for the largest portion (24.27%) of the IPCA. Within this group, “household food items” account for 15.61% of the total IPCA.

The purpose of this technical note is to examine the behavior of the price of the agricultural products that make up the “food and beverages” group and to propose some reasons why these products had such a large impact on the IPCA last June.

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The Brazilian economy maintained its growth recovery through the end of 2017 and beginning of 2018, as shown, among other data, by the upward trajectory of industrial production and by the declining trajectory of unemployment rates.

Thus, in spite of the fact that the process has lost some momentum, the data still point to a positive scenario for this year. The Ipea Indicator for the output gap is at 4.4%, suggesting that there still is spare capacity in the economy and that monetary policy can remain stimulative without the risk of stoking back inflation.

In fact, a positive surprise in the early months of 2018 came precisely from the inflation scenario: in the first bimester, recorded inflation for the period was the lowest in a long time. This benign behavior of inflation ratifies the widespread expectation that monetary policy will remain in expansionary mode throughout 2018 and that it shall be the main driver of economic recovery. Among our new forecasts for 2018, the numbers for inflation were the ones that changed the most. The remaining indicators are mostly unaltered, when compared to the Ipea Economic Outlook of January 2018.

Also on the positive side, the Brazilian current account has shown surprisingly low deficits, mainly due to the strongly positive trade balance, while inward foreign direct investment remains very high. One reason for such a performance is the favorable international background, which has featured synchronized growth among the major economies and a recovery of international trade. Even if recent data indicate some global deceleration in economic activity, and in spite of the outburst of volatility early in February, international liquidity remains high and global inflation, low. Even in the economies that are more advanced in their economic cycles, as the USA, there are little signs of price acceleration. Therefore, the trend is one of a gradual normalization of their monetary policies.

On the negative side, the suspension of the vote concerning the pensions reforms in Congress was a source of frustration. The adverse implications for the sustainability of the public debt led to a further downgrade of the Brazilian debt rating by one of the major rating agencies. However, markets’ response to the vote postponement was mute, maybe due to a consensus that the next administration will have to push the reforms forward, no matter who wins this year’s elections. Also, some positive indicators revealing a small short term relief in the public deficit may have contributed to reduce the financial markets volatility. The primary deficit was below the target in 2017 and government revenues were higher than expected in the beginning of 2018. Both point to the attainment of the fiscal goal for this year, though the real challenge in 2018 should be to trim the primary deficit as a proportion to GDP with respect to 2017.

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