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Lower welfare spending may curtail Brazil recovery

Tuesday, July 27, 2021


The economic effects were immediate: a sharp outflow of portfolio capital, which generated exchange rate devaluation of 27.3% in three months; a contraction in GDP, driven down by services and the industrial sector and particularly evident in the second quarter; and a sharp increase in unemployment, which reached 14.4% in August 2020.


  • Conflicting pressures between welfare spending and fiscal rectitude will mount in coming months.
  • Poverty and inequality will again begin to rise.
  • Reduced crisis-related spending may slow economic recovery this year.

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