The winter will be long. We will cross it with our tropical souls doubting the sun. But it will return. During this journey, we will live with high inflation, news of unemployment, recession, and all the chain reactions of the largest anti-corruption operation ever seen in Brazil. The government is falling apart too quickly for the start of its term, and its political base is fleeing from the exposed weakness.
In the economy, this winter will be the second year of stagnation, in which activity will descend a further step. Zero growth this year would be the best-case scenario, but even the Central Bank no longer believes in it. The meager 0,1% of 2014 does not constitute growth, but it spared the government the ugly word "recession" splashed across the newspapers. However, it will not escape it again. The country tolerates not growing, but detests high inflation. When both discomforts appear together, economic unease grows. Nobody likes it. At some point, they will look for someone to blame, and the remedy will be accused of causing the disease. This will be an analytical error, but it is already being encouraged by the ruling party, where knowledge of economic theory is generally shallow. Fingers will increasingly point to the economic team as the cause of the ills contracted in the previous administration.
It's still autumn, but it doesn't feel like it. Companies have already started closing some windows. Investments are suspended, canceled, loans are not granted, interest rates charged by lenders rise, and companies prefer not to take risks. Such an environment is almost glacial. Except for the literal temperature, which at certain times of the day remains reminiscent of the scorching, dry summer we had in the Southeast and Northeast of Brazil.
Even in the coldest winter months, it's necessary to think about the return of the sun, because those who cut back too much don't prepare themselves to seize opportunities when they arise. But this is the most difficult time to make decisions. Cutting back seems sensible. Beyond a certain point, however, it becomes counterproductive.
In politics, the atmosphere is one of mass exodus, as if the center of power were not what it is, but a meteorite that has fallen, threatening to drag down anyone who approaches it. This always happens in crises. Power attracts; the loss of power repels. What is unexpected is weakness visiting the government at the beginning of its term. The situation can be overcome, but the crisis needs to diminish upon entering the palace. This has not been happening. Today, when the crisis enters the center of government, it finds a void of people and ideas and emerges even stronger.
In this climate, one cannot enlist the economics expert to confront the disagreements in the political arena. This direct confrontation must be left to the political strategists. They have disappeared. They were incompetent, made many mistakes, or were neutralized by the internal power struggles over who is best suited for the role. Power has visibly shrunk.
The tremors of the fight against corruption will continue to attract everyone's attention. They will trigger a domino effect on the economy. Petrobras remains lost in its accounting labyrinth. Afraid of making mistakes, it suspends contracts, which affects companies that don't receive loans, banks have to make provisions and will claim their share from insurance companies. Some companies will take advantage of this to claim they are victims of the treatment against the disease of corruption, when in fact they were unsustainable without the vices that have dominated the economy. Any generalization is dangerous. There are healthy companies and others chronically dependent on the shady ways of doing business that have spread throughout the country. Perhaps the year will separate the groups. But all will suffer from the tremors. The important thing to navigate through the confusion is not to lose sight of the goal: the fight against corruption is the indispensable treatment for a stronger economy in the future.
Cold winds will come from all sides. Inflation will reduce income, business crises will increase unemployment, correcting past mistakes will reduce public spending, and the fragmentation of the government's support base will fuel uncertainty everywhere. That's why I started by saying here that the winter will be long. But our tropical soul needs to be informed that the sun will return.
