The managing partner of Gibraltar Consulting, Zeina Latif, stated that the federal government is anticipating possible influences of the war in the Middle East on the Brazilian economy. In an interview with CNN Brazilduring the WWthe economist analyzed the proposal for subsidy on diesel imports announced by the Ministry of Finance, relating the measure to the current geopolitical scenario.
According to Latif, depending on the extent of the conflict, there is reason for concern, as it could create a “perfect storm” with direct impacts on the Brazilian economy and, consequently, on government approval. “Bad news hurts government approval much more than good news benefits. It’s very asymmetrical,” explained the economist.
The expert drew a parallel with the post-pandemic period, when the war between Russia and Ukraine put pressure on . “I have no doubt that that pressured inflation was a factor that greatly harmed President Jair Bolsonaro’s competitiveness,” he stated, highlighting the impact of food prices on the electorate’s perception.
Latif noted that the current context is different, with global inflation better behaved than in the post-pandemic period. However, he highlighted that the government’s net approval rate is already negative, with more people disapproving than approving, which would justify the anticipated concern about possible economic shocks.
Impact on state finances
The economist also commented on the fiscal situation of Brazilian states, which would be affected by . “ICMS collection continues to grow in real terms, but there is already an ongoing slowdown due to economic activity,” explained Latif.
According to the expert, last year, GDP grew by around 1.7% in real terms, slightly below GDP growth. This slowdown makes it difficult for some states to accept giving up revenue or transferring resources to the subsidy proposed by the federal government, reinforcing that “the state’s finances are not easy either.”
