April 30, 2020 / 3:30 PM / a month ago

Brazil unemployment could double, FX volatility a concern: official

BRASILIA (Reuters) - Brazil’s unemployment rate could double due to the coronavirus crisis, privatization secretary Salim Mattar said on Thursday, insisting that slashing the size of the state in the economy will be crucial to the post-crisis recovery.

In a wide-ranging online debate hosted by Credit Suisse, Mattar also said the exchange rate’s weakness and intense volatility recently is a concern, potentially souring investor sentiment towards Brazil.

“We already had a high unemployment rate in Brazil. It may increase between 50% to 100% of what it was before,” Mattar said in a live online event hosted by Credit Suisse, adding that the outlook will only become clearer around July and August.

Earlier on Thursday, official figures showed that unemployment rose to 12.2% in the three months to March from 11.6%.

Mattar said that the government must do all it can to attract private investment and reassure foreign investors who are becoming increasingly concerned about exchange rate volatility.

The real sank to a record low last Friday near 5.75 per dollar BRBY, losing more than 7% of its value in one week, its biggest weekly decline since the global financial crisis in 2008.

It has bounced back strongly this week, but many analysts expect the looming recession and further interest rate cuts to push it back toward 6.00 per dollar in the coming months.

Mattar also said that program of privatization and sale of state assets must be resumed when the crisis has passed. This will make Brazil a more “ethical” country, as state involvement in the economy is always “pernicious”, he said.

The government had planned to raise around 150 billion reais this year before the crisis struck.

Mattar said that President Jair Bolsonaro has been discussing privatization with the economic team, and said that infrastructure projects that will help support the economy should be carried out by the private sector.

“Do we need to increase investment in infrastructure? Yes. With public money? No. It has to be private money,” he said.

A “Pro-Brazil” investment plan was unveiled last week by Presidential Chief of Staff Walter Braga Netto and Infrastructure Minister Tarcisio Freitas, raising speculation that the vehemently pro-free market Economy Minister Paulo Guedes was being sidelined on economic policy.

Mattar said those behind the plan are good people, but “hell is full of people with good intentions”, and insisted that Guedes retains Bolsonaro’s full support.

Reporting by Marcela Ayres; Writing by Jamie McGeever; Editing by Chizu Nomiyama and Jonathan Oatis

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