RIO DE JANEIRO, Feb. 4 (Xinhua) — U.S. President Donald Trump-proposed economic policies will have a negative impact on Brazil’s sluggish growth, local economic analysts told Xinhua recently.
Trump has called for protectionist measures to bolster the U.S. industry and an infrastructure-building binge that stands to consume considerable investment, among other things.
Giorgio Romano Schutte, coordinator of international relations studies at the Federal University of ABC (UFABC) in Sao Paulo state, warns that one of the consequences of Trump’s infrastructure plan will be “to increase the U.S. public deficit.”
Schutte said recent history suggests “Republican governments” have been the ones who have “contributed most” to ballooning public debt.
The plan to invest heavily in public facility projects, however, has been met with approval from the private sector, which helps to explain “the recent rise in the stock market” in the United States, said Schutte.
Independent political and economic consultant Jose Delella said trade protectionism and tax deregulation, both pillars of Trump’s economic policy, will intensify the “inflationary tendency” in the United States.
Delella predicts “a rapid rise” in U.S. interest rates, saying “I wouldn’t discard there being three successive increases of 0.25 points through 2017.”
Given this scenario, a surge in investors looking for safe havens for their money, such as U.S. government bonds, will inevitably lead to “capital flight throughout Latin America,” with “devastating consequences” for the monetary policy of Brazil’s government, said Schutte.
To counter this, Brazil’s central bank might “turn back” on its policy of lowering interest rates, a move that could put brakes on the country’s resumed economic growth, which the International Monetary Fund (IMF) forecasts will reach 0.2 percent in 2017, said the academic.
Some analysts suggest that Brazil should continue to bet on its commodity exports as the best way to pull itself out of its economic doldrums. In 2016, the country’s trade balance saw a surplus of 47.7 billion U.S. dollars.
Trump’s trade restrictions on Mexico may generate “enormous opportunities” for agricultural exports from Brazil and Mercosur (Southern Common Market), said Alberto Pfeifer, a consultant and expert on international affairs at the University of Sao Paulo (USP).
“Brazilian agricultural commodities depend more on Chinese demand and growth in emerging economies, than on U.S. demand,” he said.
The U.S. market is “very important” to Brazil, but mainly as a destination for its “low-tech manufactured goods,” said Tullo Vigevani, professor of political science and international relations at the Sao Paulo State University (UNESP).
Thus, Trump’s trade restrictions on Mexico may generate “enormous opportunities” for agricultural exports from Brazil and Mercosur, he said.
However, Brazil’s industrial production, which contracted 6.6 percent in 2016, could indirectly suffer from the trade barriers Trump’s administration may erect against Mexico and China.
“The productive capacity that encounters problems with the U.S. is going to seek other markets. That scenario increases competitivity and that’s bad for Brazilian industry,” said Schutte.
Mexican assembly plants that find themselves idling, for example, “can end up exporting their goods to Brazil.”
“It’s very unlikely that Brazilian companies will benefit from the trade wars between the U.S. and Mexico,” said Pfeifer.
He also believed that any relocation of production from Mexico to U.S. territory will be purely “temporary,” because “it runs counter to” the long-term strategic planning of U.S.-based multi-nationals.
