Over 450,000 people have died in Brazil as a result of the Covid-19 crisis, and many more have lost their livelihoods. Brazilians are experiencing one of the country’s worst economic downturns in history. Millions of people are still unemployed, inflation is rising, countless businesses are failing, and people are starving.
“This is the new lost decade, worse than the 1980s,” says Claudio Considera, an economist and coordinator of the Getulio Vargas Foundation’s National Accounts Center.
The oil glut of the 1980s slapped Brazil with soaring foreign debt, a drastically devalued currency, and hyperinflation of over 200 percent, after several decades of economic prosperity. Wage freezes, skyrocketing food prices, and empty market shelves plagued Brazilians for the next decade.
After a period of recovery thanks to economic reforms and a more stable, democratic government, Brazil experienced its longest and deepest recession from 2014 to 2016 under the administration of former President Dilma Rousseff, who was impeached after botched public spending sank the economy and fueled inflation.
“From then we weren’t able to recover growth, and then the pandemic came in 2020 and threw Brazil into an even worse scenario,” adds Considera.
Jair Bolsonaro’s election in 2019 did little to correct Brazil’s economic trajectory. Privatizing state-owned industries, as well as labor and pension reforms, have all failed to address high unemployment and inflation.
Then came the pandemic.
Since the arrival of Covid-19 in Brazil, the federal government has pursued a policy of avoiding restrictions “at all costs,” in the hopes of surviving the virus’s spread without causing significant economic damage.
President Bolsonaro declared at a press conference on May 15, 2020 that lockdown measures would be “a path to [economic] failure.”
On February 23, nearly a year later, he emphasized, “This ‘we’re going to close everything’ lockdown story isn’t the way to go. This is the road to disaster. It will destabilize Brazil.”
Bolsonaro went so far as to ask Brazil’s state prosecutor to file a request with the country’s Supreme Court to stop governors and local officials from imposing lockdowns in March. Bolsonaro told supporters after the court dismissed the case that “Chaos is on the way. Hunger will push people out of their houses, we will have problems that we never expected to have, very serious social problems.”
Indeed, the pandemic has had serious economic consequences for many Brazilians. One of them was Nilza Maria da Silva. The 45-year-old, who lives in the favela Paraisopolis in Sao Paulo’s south, lost her cleaning job as soon as the pandemic broke out.
“My bosses were afraid of Covid-19, nobody wanted me inside their houses and I was left with nothing,” said da Silva, a mother of four.
Between January 2020 and January 2021, more than 8.1 million people in Brazil lost their jobs. According to the Brazilian Institute of Geography and Statistics, the unemployment rate in Brazil has reached a new high of 14.7 percent of the working-age population (IBGE). Since IBGE began keeping track in 2012, this is the highest unemployment rate.
However, many experts believe that the fact that the coronavirus was allowed to spread unchecked harmed the economy, and that the Bolsonaro government could have avoided some economic pain by putting in more effort to stop the virus.
Government denial, refusal to adopt lockdown measures, and failure to obtain early stocks of vaccines, according to Thomas Conti, an economist at the Insper Institute and a science communicator at the InfoCovid group, have created a dangerous sense of uncertainty in the economy.
“When a pandemic of this scale occurs, the economy will suffer a blow even if nothing closes. People are affected by risk. When people understand they are at risk, that they can lose their lives or the lives of close ones, they change habits, they avoid exposing themselves, regardless of measures,” said Conti.
“The role of a government in such a situation is to try to control or mitigate the risks, but they decide to do nothing to combat the pandemic as if it would magically disappear. That created a sense of uncertainty, insecurity and unpredictability. This poses a great risk for entrepreneurs, it makes companies fire staff, it makes people spend less to save, it pauses investments,” he added.
The main public policy adopted by the Brazilian government in response to the labor market crisis during the pandemic was emergency aid.
The federal government provided a line of credit to pandemic-affected small businesses, though the assistance only reached a small percentage of Brazilian businesses, and the offer of loans rather than handouts was risky for many business owners. As a result, by 2020, tens of thousands of retail stores will have closed.
Congress also passed emergency legislation requiring government assistance for those most affected by the pandemic, including a program that would pay five monthly installments of USD 110 per qualifying recipient between April and August 2020, and four installments of USD 50 between September and December 2020.
According to the Ministry of Economy, the program benefited nearly 70 million Brazilians.
Da Silva claims that the government assistance was just enough to get her family by in 2020. However, since 2021, government assistance has decreased, and she has had to rely on neighbors and local organizations for support.
“I didn’t go hungry because the Paraisopolis community is very organized and helped me with food, because it is all very expensive now. But there were times I had no money to buy cooking gas and had to use firewood to cook,” she said.
And not every Brazilian community is as cooperative as Paraisopolis. More than half of Brazil’s population — 116 million people — did not have full and permanent access to food last year, according to research conducted by the Brazilian Network for Research in Sovereignty and Food and Nutrition Security.
Even the financial sector, which has backed Bolsonaro since the start of his administration, has grown tired of his tactics. Over 1,500 economists, bankers, businessmen, and former ministers signed a letter criticizing the government’s pandemic response and emphasizing the need to contain the virus in order to save Brazil’s economy.