Brazil Went All-In on Covid Stimulus But Let the Virus Run Wild
- Emergency aid extended after failure to get a grip on pandemic
- Currency rout on budget woes pushes central bank to hike rates
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.
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 chaotic virus policy -- along with a lagging vaccination program -- is triggering new lockdowns just as other countries are seeing the health crisis abate.