Brazil Went All-In on Covid Stimulus But Let the Virus Run Wild

Brazil spent more money shielding its economy from the pandemic slump than almost any other emerging nation, and quite a few wealthier ones too. It put much less effort into containing the pandemic itself, Bloomberg News reported. That combination is putting the country’s economic policy under growing strain. It’s one reason why Brazil is poised to become the first Group of 20 country to raise interest rates this year. The central bank, which just a few weeks ago was talking about keeping its benchmark at a record-low 2% for a while yet, is now expected to hike it by 50 basis points Wednesday. The bank, led by its President Roberto Campos Neto, has been forced to U-turn in order to stem a slide in the currency that’s pushing inflation higher -- driven, at least in part, by investors worried about public spending. And because Brazil has the world’s worst Covid-19 outbreak right now, it’s hard for the government to pare back its outlays anytime soon. President Jair Bolsonaro ran up a record budget deficit last year to pay for what were supposed to be one-time measures, like cash handouts. But his virus policy -- along with a lagging vaccination program -- is triggering new lockdowns just as other countries are seeing the health crisis abate. The upshot: policy makers have already had to renew the emergency aid, including cash handouts to low-income Brazilians. Privately, members of Bolsonaro’s economic team say further extensions are likely. Read more.
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