In previous pieces, we have analyzed the run up to the still-ongoing Brazilian recession as a combination of factors. Given an “anemia” of productivity increases, an appetite for public spending without prioritization led to a condition of fiscal “obesity”. The external factors that provided for a boom in the new millennium, notwithstanding underlying vulnerabilities, have dissipated. The economic policy adopted as a response to the growth decline aggravated those vulnerabilities. On top of those, a disruption of existing large domestic corporate structures followed broad corruption investigations (Canuto, 2016a) (Canuto, 2016b) (Canuto, 2016c).
Here, with the help of five charts, we touch on another dimension of Brazil’s economic boom and bust, namely, a credit cycle, the downward phase of which helps understand why the post-crisis recovery has been so hard to obtain. In our view, the profile of such a credit cycle in effect points to it as a special chapter of our previously approached determinants of the Brazilian economic crisis.