Biden or Trump? See possible scenarios for the Brazilian economy | economy

Throughout the campaign, the two candidates were not very detailed in their foreign trade proposals with Latin America. The focus was on China and the European Union, indicating, according to analysts, that any change in trade with Brazil should not happen soon.

“The first observation is that Latin America as a whole is not a central issue for US foreign policy,” says Welber Barral, a former foreign trade secretary. “Most likely, Brazil is a secondary issue and is in danger of being dominated by the environmental issue.”

Currently, the United States is Brazil’s second main trading partner, behind only China. Between January and September of this year, the flow of trade (sum of imports and exports) with the United States totaled 44.6 billion dollars. With the Chinese, the chain reached 73.4 billion dollars.

Biden and the environmental problem

A leader in electoral polls, Biden has already cited the high deforestation of the Amazon in a debate with Trump and said that Brazil could face “economic consequences” if the rates of forest loss are not reversed.

Increased deforestation in Brazil has been on the radar of other countries for some time. The European Parliament, for example, indicated that the agreement with Mercosur – which took 20 years to sign – should not be ratified if the Brazilian government does not promote changes in its environmental policy.

• Burns in the Amazon in 2020 become a number recorded throughout 2019
• With 2,825 points of fire, Pantanal has the worst October in history, according to INPE data

“Unlike Trump, with Biden (in the presidency), I think there will be a significant effect in the environmental area, there will be coordination between Europe and the US to put pressure on Brazil,” says Rubens Barbosa, former Brazilian ambassador. in Washington between 1999 and 2004.

In this scenario of Biden’s election, in which the environmental agenda must gain momentum, Brazilian products may suffer some kind of difficulty in entering the North American market and possible trade agreements must stagnate.

“Democrats in Washington, in the White House and in Congress, would probably question Brazil’s environmental policies … and could refuse to sign trade agreements with the Bolsonaro administration,” wrote the BNP Paribas bank economists Marcelo Carvalho and Luiz. Eduardo Peixoto.

With Trump, relations of greater protectionism must continue, but it is not yet possible to know if there will be a step forward.

In this first term, the current president of the United States opened a trade war with China and increased tariffs on steel and aluminum imports, which affected Brazilian producers.

• The United States and China sign phase 1 of an agreement to ease the trade war

The most protectionist measures in international trade came under a policy that Trump called America First. In the 2016 campaign, he promised to reduce the country’s trade deficit.

The Republican also alienated the US economy from multilateral entities and negotiations by emptying the World Trade Organization (WTO) and pulling the United States out of the Trans-Pacific Partnership (TPP).

“Trump has already said many things about toughness. If he continues in that tone, what is expected is a more conflictive international scenario,” says Lia Valls, a researcher at the Brazilian Institute of Economics of the Getulio Vargas Foundation.

The implementation of fifth generation (5G) technology in Brazil should also be affected depending on the outcome of the US elections.

In the trade war between the United States and China, 5G has become one more battle. The two countries dispute which nation will have the influence in the world of the implantation of the new technology.

In a clear sign of this technological war, the Chinese company Huawei, which owns patents on 5G, faces restrictions in the United States. The company is accused of having relations with the Communist Party of China. In July, the UK excluded Huawei from its 5G network.

In Brazil, the 5G auction was postponed until 2021 due to the coronavirus pandemic.

For now, Bolsonaro has said that it will be up to him to decide on the implementation of 5G mobile internet in Brazil, which may indicate a preference for the United States in the event of a Trump victory, of which Bolsonaro claims to be an ally.

According to Bolsonaro, “nobody will guess” in the definition of technology.

“If Trump wins, the pressure for Brazil to side with the Americans could increase,” says Barbosa. “With Biden, internal groups, companies that want the country to have an independent position, will be strengthened. Brazil may not exclude the Chinese company from the 5G bidding process.”

In October, the Export-Import Bank of the United States (EximBank) and the Ministry of the Economy signed an agreement that provides for one billion dollars to finance various projects in Brazil, including 5G.

In the financial market, the agents read that the presidential dispute must be won by the Democrat. “The most likely scenario is a Biden victory, unopposed,” says Mauá Capital chief economist Alexandre Ázara.

Investors, however, are also looking at the US Senate elections. A big Democratic victory in the House may indicate that the party will have the strength to pass various fiscal stimulus measures, which could worsen the country’s public accounts.

In this context, to contain inflation stimulated by fiscal deterioration, the Federal Reserve (Fed, the central bank of the United States) may be forced to raise interest rates, which would affect emerging economies, such as Brazil. Today, the interest is in the range between 0% and 0.25%.

Higher interest rates in the US have the potential to attract funds invested in emerging economies.

“The size of the representation in the Senate is as important as the election itself,” says Ázara.

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