Is Brazil on the verge of a rapid recovery?

In Latin America, new corona infections are slowly decreasing – but from a high level and not everywhere. Growth forecasts remain mixed. Only Brazil is surprisingly positive.

by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung


In September, infection rates in Latin America are falling for the first time. The exceptions are Argentina and Venezuela. In Chile and Mexico the numbers of new infections are stabilising. In the other major economies, infection reports are declining. But there is still no all-clear signal. In many countries, public life is still reduced, with schools still closed. Nevertheless, infections are still rising sharply in individual regions and countries.

Currently, Latin America is responsible for more than half of the officially registered corona victims worldwide. Internationally, Brazil is in second place for the highest number of corona deaths worldwide. Among the ten countries in the world with the highest number of deaths per day and per million inhabitants are currently eight from Latin America. This applies to countries like Argentina or Peru, which pursued strict isolation policies, and also to countries like Mexico, which did not.

The consequences for the economy are not yet clear. The massive government compensation measures, as in Chile or Brazil, have a positive effect on the economy. China’s rapid recovery has also led to a surge in exports of raw materials from agribusiness, energy and mining.

After initial pessimistic forecasts, the outlook for the economy improved slightly in the middle of the year. The investment bank Morgan Stanley expects the gross domestic product in Latin America to shrink by 8.5 percent this year. For 2021, the bank expects growth of 4.7 percent. Regional GDP will not return to pre-pandemic levels before the end of 2022. The recession will hit Peru (-15.8 percent), Argentina (-12.7 percent) and Mexico (-10.5 percent) hardest. Chile (-6.8 per cent) and Colombia (-8.2 per cent) will experience lower losses.

The recession in Brazil (-5.1 percent) is likely to be surprisingly weak, i.e. about as severe as in Germany. This is a positive sign for South America, which depends on Brazil as a growth driver. The Organisation for Economic Cooperation and Development (OECD) has also just noted that among the world’s largest economies, Brazil is the country with the strongest signs of expansion in August – after China.

It remains to be seen how sustainable this change in sentiment will be: With its massive compensatory payments of 11.8 per cent of GDP, Brazil ranks 24th among 168 nations worldwide that are stimulating their economies most with government measures. Shortly after the USA, but far ahead of France, Spain and Italy. But the state corona aid will be phased out by the end of the year at the latest. The question now is whether companies will start investing by then.

COVID-19 in Latin America

Development of case numbers in the region

Currently reported cases in the countries

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