Brazil’s economy contracts for first time in three years

Bloomberg

Brazil’s activity took its first quarterly plunge since 2016 as investment tumbled further, casting doubt on the recovery of Latin America’s largest economy.
Gross domestic product shrank 0.2 percent in the first quarter, compared with a 0.1 percent increase in the three months through December, the national statistics agency said. The result was in line with the median estimate from economists surveyed by Bloomberg.
Optimism that President Jair Bolsonaro would quickly unlock Brazil’s growth potential is facing the harsh
reality of lengthy negotiations between Congress
and his inexperienced administration. Delay in passing reforms is keeping much-needed investment at bay and, meantime, the economy has been buffeted by blows to production. Not even borrowing costs at an all-time low are encouraging a pick-up in consumption, which remains the only relative bright spot.
“The data is bad without
a doubt, demonstrating the economy’s weakness at the start of the year,” said
Luciano Rostagno, chief strategist at Banco Mizuho do Brasil. “But we have
to consider some shocks
that prompted a negative reading.”
First-quarter results were marred by a bad crop that caused agriculture to decline, deadly collapse of a mining dam in the town of Brumadinho that torpedoed iron ore shipments, and a prolonged recession in neighboring Argentina that is sapping demand for Brazilian car exports. Brazil’s industry contracted 2 percent, driven by a 6.3 percent drop in extractive activity— its biggest in a decade.