MNI POLICY: Brazil Will Struggle to Meet 2020 Growth Goal

--Factories Already Stalling as China Shipments Disrupted

By Afonso Benites

     (MNI) - Brazilian President Jair Bolsonaro will struggle to meet a goal of

reviving economic growth as reforms stall in Congress and the coronavirus hurts

exports to its biggest trade partner China, officials told MNI. 

     Technicians from the Ministry of Economy may need to lower growth forecasts

that could have been 2.4% this year, far ahead of 2019's 1.1% advance.

     The president's two priority projects are stalled in parliament: a plan to

reduce the size of government and broad tax reform. The first one has not yet

been sent to the legislature despite the insistence of Minister of Economy Paulo

Guedes to deliver it as soon as possible. The second is being processed by a

commission without any government contribution. 

     "The government has only been a witness in this process," said Marcelo

Ramos, deputy of the Liberal Party and a commission member.

     Bolsonaro has picked fights with parliament in recent weeks, vetoing a law

that he had supported, calling for demonstrations to close the National

Congress, and breaking state spending agreements.

     "The president has been a machine for creating conflict," said Senator

Rogerio Carvalho, leader of the opposition Work Party. 

     Brazil needs "a positive impact from reforms and monetary policy support"

to boost growth, the OECD reported Monday as it slashed global forecasts on the

coronavirus outbreak. The Paris-based group said Brazil's economy will grow 1.7%

this year and 1.8% in 2021. 

     There is still little official data on how much the COVID-19 outbreak will

hurt the Brazilian economy, which sends 30% of its exports to China.

     "We will have a drop in the quantity of exports and in the prices of

commodities. For Brazil it is a double loss," said the president of the

Brazilian Foreign Trade Association, Jose Augusto Castro.

     Supply-chain disruptions are already hitting the economy. Delivery of

hospital masks is delayed with local industry asking the Government for more

time to fill part of a 7-million-unit order. The Ministry of Health said almost

70% of the material needed comes from China, and the Chinese bought part of

Brazil's mask inventories in January.

     One of Motorola's partner factories in Sao Paulo, Flextronic, had to give

their employees collective vacations because they had no supplies to assemble

cell phones. A survey by the Brazilian Association of the Electrical and

Electronic Industry showed 57% of companies in the sector are having

difficulties in receiving materials for their factories.

     Carlos Brandt, director of Dataprom, a company that produces traffic lights

and traffic surveillance equipment, says that its deliveries are two months

late. "Our suppliers in China say they won't be able to deliver our orders this

week, but maybe the next week they will. When the new deadline comes, they

postpone it again," he said.

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