Itaú BBA - Evening Edition – Brazil´s president to meet with party leaders tomorrow

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Evening Edition – Brazil´s president to meet with party leaders tomorrow

April 3, 2019

It is important to watch the outcome of these meetings closely, to gauge the lawmaker's positions may evolve throughout the next weeks.

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Local news (Globo) indicates that president Bolsonaro will meet with party leaders in order to improve the political articulation. The five parties the president will reportedly meet tomorrow (DEM, PSD, PP, PRB and MDB) are among the ones with the highest share of “undecided” lawmakers on the pension reform, according to the latest survey conducted by Atlas Politico (on April 1st). Hence, it will be important to watch the outcome of these meetings closely, to gauge how their positions may evolve throughout the next weeks.

According to Fenabrave, vehicle sales reached 209k in March, rising 4.8% mom/sa (from 1.3% in the previous month). In year-over-year terms, sales increased 0.8%. The breakdown shows a 5.0% increase in “passenger cars + light vehicles”, and stability in “trucks + buses”. We expect auto production (Anfavea), to be released tomorrow, to print a 4.5% mom/sa increase (257k). Our preliminary forecast for March’s industrial production is a 0.5% mom decline, which would lead the year-over-year rate to -4.6%.

Macro Vision:Our latest study points to the risk of a slowdown in activity, as indicated by declining business confidence. There is a strong correlation between the Business Confidence Index (ICE, calculated by FGV) and formal job creation (as measured by the Ministry of Economy's CAGED employment registry). The current ICE level is consistent with formal job creation of about 20k per month, according to our estimates. In turn, this pace of job creation is consistent with annual GDP growth of only 0.8%.
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Tomorrow’s Agenda: As stated previously, Bolsonaro will meet with party leaders throughout the day. Regarding economic activity indicators, March’s auto production (Anfavea) will be released at 11:20 AM. We expect a 4.5% mom/sa increase.


Exports improved in February as the drag from oil exports moderated. Total exports grew 6.2% yoy in February, up from the 7.8% drop in January. Coal exports expanded 13.6% (-31.9% previously), the highest growth rate since October 2018, while coffee exports accelerated to double-digit growth. Meanwhile, oil exports recovered to 5.8% (-10.0% previously) as export volumes increased compared to last year, while prices moderated their decline. In the quarter ending in February, exports fell 6.3% (versus +1.6% 4Q18 and +12.0% 3Q18) still dragged down by lower oil prices at the turn of the year and disappointing coal exports. At the margin, total exports contracted 26.3% qoq/saar (-12.0% in 4Q18 and -0.4% in 3Q18), as the acceleration in coal exports was insufficient to fully offset slowing oil exports. The weakening global economy and low oil prices (on average, compared to last year), alongside the gradual activity recovery, have hampered the outlook for external accounts. We see the 2019 current account deficit at 4.0% of GDP (3.8% in 2018). Given wide twin deficits, Colombia is vulnerable to an abrupt deterioration of global financing conditions. The full trade balance result will be released on April 22.


Tomorrow’s Agenda: February’s manufacturing and construction data will see the light at 4:00 PM. We expect to see a new year-over-year drop in manufacturing (-10.8% in January). Construction activity also contracted in the month, according to private indicators like Grupo Construya index (-13.2% yoy).

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