Judging by data from the second quarter of 2023, the Brazilian economy has consolidated growth under Luiz Inácio Lula da Silva's government. GDP grew 0.9 percent in relation to the first three months of the year and increased 3.4 per cent compared to the same period of 2022. For most large financial consultancy firms, the figure was a "surprise." At the Tendencias consulting firm, for example, they indicated that "the index was much better than expected a few months ago” and highlighted the “important resilience” of industrial activity and the services sector.
The improvement could have a knock-on effect for Argentina, especially in the weeks after September 14, when the governments of both nations and the CAF development bank will seal an agreement that will allow Argentina to import Brazilian products without requiring the immediate use of foreign currency. This help is arriving at a special moment, just when Argentine Economy Minister Sergio Massa, the presidential candidate for the ruling coalition, Sergio Massa, needs to show concrete improvements in the run-up to the elections.
The driver behind the Brazilian recovery, according to economists from top consulting firms, was higher consumption and, consequently, increased production from industry and improved commercial sales. If these parameters stay as they are now, and have been for the last few months, Brazil’s annual GDP would grow by at least three percent. Already among the top seven best performing economies, Brazil’s economy would thereby surpass the growth rates of the major powers: United States, Great Britain, Germany and even China.
The Brazilian labour market has also shown a recovery, with an increase in formal employment and an improvement in workers' incomes. Inflation for the year is estimated at only 5.1 percent, lower than in 2022. In this context, an increase in presidential popularity should not come as a surprise. In June, according to top pollster Datafolha, Lula's approval rating was 37 percent – it has now climbed to 45 percent.
The implementation of the government's plans, such as partial tax relief on fuel and an increase in Bolsa Familia welfare stipends, have contributed to the change in public mood. Silvia Matos, a researcher at the Getúlio Vargas Foundation, said: "If you had asked me a few months ago about the evolution of the economy, I would have said that a retraction of household consumption was on the horizon. But that is not what happened."
There are, however, some uncertainties, mostly related to the evolution of the global economy, which has led experts to offer a less optimistic outlook for the rest of the year. "The second half of the year will show a slowdown," said the specialist, adding that "there may be a loss of strength due to a much more difficult international scenario, with the main countries, such as China and also those of Europe, in decline.”
ForRoberto Campos Neto, the president of Brazil’s Central Bank and the protagonist of repeated confrontations with Lula, the data published by the Brazilian Institute of Geography and Statistics (IBGE) gives cause for celebration. "It was a good surprise," he celebrated in front of his country's businessmen at the meeting of the Brazilian Development Forum in Washington.