Brazil – Macro Update

We expect the economy to slow to around 1.5% YoY in 2024 after a blockbuster expansion of over 3.0% in 2023, due to a moderation in consumption and still stagnant investment. Inflation will also moderate to below 4.0% in 2024, but still above the 3.0% target. The central bank will continue to cut its Selic rate from 11.25% currently to around 8.50% by the end of the year, and the currency will remain well supported . Risks to our view include a sharp slowdown in China and a domestic shock such as a weakening of the fiscal anchor. Brazil's relationship with China is primarily economic and China buys about a third of all Brazilian exports, including most of its soybeans and beef. Brazilian leaders see China's rise as a positive development, providing a soft counterweight to the United States and a check on U.S. unilateralism.