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AmericasJuly 8 2020

Brazil’s banks brace for impact as crisis deepens

With record deaths from Covid-19, a likely recession and an unpopular president, Brazil’s future looks volatile. And its banks, though well capitalised, are likely to struggle.
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Brazil is collecting unwanted records. In the third week of June 2020, it became the second country in the world to report 1 million cases of coronavirus infections and the second with the highest number of Covid-19-related deaths after the US, according to John Hopkins University School of Medicine. Worse, analysts believe these figures are an underestimate.

They also expect Brazil to plunge in a dire recession that would range from a 4.5% gross domestic product (GDP) contraction in 2020, according to Itaú Unibanco, to an 8% contraction, according to Bank of America. “There’s only downside risk,” says Claudio Irigoyen, head of Latin America research at Bank of America. Referring to the 2 percentage points on each side of the economic prediction, he says: “It’s more likely that it will be [a recession of] 10% rather than 6% in 2020.”

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Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
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