Brazil’s (unofficial) economic forecast

SAO PAULO — Yesterday in Brasilia, the government’s Institute of Applied Economic Research issued its quarterly report on the economy. And it was rosy: The worst of Brazil’s short-lived crisis is over, the economy will grow 2 percent in 2009, the stock market has potential and the labor market, currently in the dumps, could start improving in the third quarter.

But not all forecasts are so upbeat. Just ten days ago, Morgan Stanley’s pessimistic Latin American research team predicted that the Brazilian economy will shrink a disastrous 4.5 percent, the labor market will have a bad year and tax revenues will slide.

So what’s a reporter to make of such conflicting information?

Since the Morgan Stanley analyst responsible for the report, Marcelo Carvalho, was traveling in Europe and unavailable, and government economists are, well, government spokespeople, GlobalPost turned to substitutes: Ana Luiza Freire, on behalf of Morgan Stanley, and Saleh Khaddour, on behalf of the government. Both are college students who were drinking beer last night at a nameless, smoke-filled corner bar near Mackenzie Presbyterian University in Sao Paulo.

Freire, a 20-year-old advertising student, called herself “very pessimistic.” It’s an attitude born from seeing friends laid off in Sao Paulo, and from hearing complaints about increasing costs from her father, who owns a pharmacy chain in her home state of Minas Gerais.

To her, the government predictions that the worst of the crisis is over are wrong. “I don’t agree,” she said. “It hasn’t even started yet.” Her unemployed friends, who worked mostly in the clothing industry, of coure are spending less. But even those who kept their jobs are putting away up to 30 percent of their salary “for when the crisis affects them.”

“One day, it may change,” she said. “But now the crisis is hitting hard. What happens in the United States affects the entire world. I doubt it will improve right now.”

Nineteen-year-old Khaddour, meanwhile, said Brazil’s recent economic dynamism will carry it through. “Even though before the crisis, growth was much greater,” he said. “The crisis has only diminished the rhythm of growth.”

His family and friends, he said, have not lost jobs. Some business owners he knows have complained of lower profits, but from what he has heard, his father, who is in real estate, has not been affected at all.

Khaddour thinks the dip in employment is not devastating. “There have been no mass layoffs,” he said, “just low-scale layoffs. I think it’s been more from the fact that foreign companies are taking account of the crisis outside the country.”

That’s in part because Brazil has become a darling of the world economy, much like Dubai was not long ago, and people still want a piece of it, he said. “Everyone wanted to go to Dubai, to invest in Dubai." But Brazil has a leg up on Dubai: While Dubai’s economic boom was based in large part on tourism, Brazil offers a wide range of financial investments, and is thus less vulnerable to a downturn, he said.

“In spite of the crisis,” Khaddour said, “Brazil continues to evolve.”

Pessimists like Freire and Morgan Stanley and optimists like Khaddour and the Institute of Applied Economic Research represent the two extremes. A recent Brazil Central Bank survey showed the average gross domestic product prediction for 2009 was +0.01 percent (That’s technically “growth,” but really more like what happens to your fingernails after you die.)

Over at the next table at the corner bar, a 19-year-old law student, Rafael Camargo, fell more into that middle ground. “I don’t know which side to believe, but I think we won’t feel the whole brunt of the crisis here,” he said.

Though he did not necessarily agree with the predictions of recovery, he believes (like many experts) that the economy’s future depends greatly on how optimistic people are about the economy’s future. An upbeat government is thus necessary to combat economic doom-and-gloomers like Morgan Stanley. After all, Camargo said, economic depression should be treated like clinical depression. “If the government does its job well,” he said, “we’ll recover at home, instead of in the hospital.”

For more on the global economic crisis: