Text commented by Bruno de Queiroz - Executive Director of Galeazzi & Associados,

Out of both interest and work necessity, I always keep a close eye on the various economic changes happening in Brazil and around the world. In recent years, particularly due to the pandemic and global economic downturn, I have observed how our country and other Latin American nations have struggled to recover and stabilize.

However, this article from the International Monetary Fund (IMF) points out some improvements regarding the quick responses of South American countries to widespread crises. In other words, their responses have been more effective than those of other nations in similar situations—such as the 2008 crisis, which had a significant impact on global powers and developing countries alike.

The quicker response of Latin American countries to significant deficits caused by the pandemic was fiscal stimulus to reduce debt. Although we are still working towards overall rebalancing, the IMF study itself shows that it could have been much worse.

Of course, this came with the consequence of rapidly increased interest rates, which became the primary tool for controlling inflation. Currently, we can already see some Latin American currencies experiencing appreciation, and there is now a broad discussion about interest rate cuts, including in Brazil. This seems far from happening in developed countries, which, on the contrary, are discussing interest rate hikes.

The IMF itself considers the outlook for our region positive and already raises other future concerns that go beyond just the economy. These include overcoming productivity stagnation, addressing security and crime issues, and mitigating the effects of climate change, among others.

Personally, I believe our country still faces some significant challenges, especially concerning the behavior of key factors for achieving fiscal stability. I don't see very positive prospects for sustained economic growth, although in 2023, we might witness some GDP growth in what could be described as a 'flight of the bumblebee' movement.

Finally, I think the reduction of interest rates will happen at a slower pace than some expect, and there will be a more opportune moment for new investments and substantial changes in the economy. However, it's worth monitoring how neighboring countries are evolving and how economies are regaining strength.

(Source: Orbon Alija/iStock by Getty Images)

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