26 2016 ysis stems from the fact that the set of factors necessary for economic expansion has remained unchanged. In other words, as the old saying goes, “You cannot expect different results by doing the same things.” So, you can understand Robson Andrade’s pragmatism. “Little progress has been made in creating a credible and permanent fiscal adjustment, together with structural changes that could boost the recovery of economic activity. The scenario for 2016, then, is no different from 2015,” he says. Based on this situation, the view laid out by the CNI, the economy will continue to shrink in the first months of 2016.Gross Domestic Product (GDP) will close the year down by 2.6%, driven especially by the 4.5% fall in industrial output. Unemployment will reach 11%, household consumption will fall by 3.3% and investment will fall by 12.3%. However , even faced by this bleak situation, the good news is that the president of the CNI does is not a defeatist. On the contrary, interpreting his analysis shows that there are conditions to turn this crisis around. Of course it is not as easy as pushing a button and getting results the next day. Change begins with courage - or self-interest - by governments, at all levels and positions, both in the executive and the legislative. Moreover, these first initiatives would be enough to change the market’s expectations, creating the conditions for a return of investment and, consequently, accompanying benefits. The CNI believes the economy will resume growth if Brazil adopts an agenda based on three pillars: macroeconomic stability, long-term fiscal adjustment, and improvement in the business environment and legal certainty. “Only in this environment will the economy return to sustainable growth,” says Robson Braga de Andrade. Taking into account current difficulties, the representative body of Brazilian industry has outlined two medium-term scenarios for Brazil. It stresses that both depend on the choices that the country will make to tackle the crisis. They are: 1. Path correction - Brazil will continue the changes underway, deepening the ongoing cuts in public spending and moving forward with structural reforms. “In this case, after a period of significant adjustment, the economy will claw back confidence and increase competitiveness, with a new growth cycle starting in 2017. 2. Specific cuts - Brazil still has problems in defining and changing the current fiscal and tax system, and improving competitiveness. Uncertainty and a lack of confidence remain and the economy faces a long period of stagnation. Simefre: difficulties Simefre says the outlook, in the segments that make up the automotive sector, is not at all good. The situation could even worsen in the medium term if there is no investment in technology. “Technology does not stand still. If there is no investment of course Brazil will suffer. It is an impact that we feel very soon. Other countries invest while we get left behind and it will not be easy to recover,” says José Antonio Fernandes Martins, president of Simefre. His explanation for the weak demand at the beginning of the year is in step with industry analysts, for whom, he says, the predominant factor for the market’s decline is the lack of credit. To reinforce his thesis he talks of extending PSI4, under different conditions. “While in 2014 businesses paid 6% interest on 10-year loans, with 100% financing and a year of grace, the current PSI4 is divided into two segments. For small and medium enterprises, financing is 70% with interest of 9.5% a year and the other 20% at a 17% market interest rate. The payback term fell to 6 years with 6 months grace, financing only 90%. For large companies, financing is 50% with 10% interest a year and 40% finance at 17.5% a year over six years and a grace period of 6 months. Result: both programs have an average interest rate of 17% a year, considering the 4% increase in the spread charged by financial agents,” he says. Martins also links economic performance to the political situation. For him, without adequate fiscal adjustment there is no way to balance the economy. “Because there has been no fiscal adjustment, the country is grinding Institucional Institutional
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