These days soccer fans are at their most.The long waited 2014 world cup is under way in Brazil , and from time to time every one from any place in the world, stop by at the TV set to watch for their team outcomes.Americans, Japaneses , Germans ,Italians, Argentinians ,Chileans,and so on keep their atention to the matches and its last minute goals, missing chances , great goal keeper catchs, and the like.
Brazil has gone through it own nightmare to get this 2014 World Cup done. Most of Brazilians ,realized that it was unclear the justification for the amount of money spent on stadiums and facilities.Besides the whole process of construction had fatalities to be sorry for.Nine workers died ,and some of the stadiums were close to be finished just a few days before the inauguration ceremony .
However, it is expected that 600.000 fans from differents places around the world, will visit Brazil and those cities where there are world cup matches. This will mean between USD 2500- USD 3000 million in revenues for the brazilian economy, which may boost the GDP by some percentage at the end of the year.Brazilian GDP has been decreasing from the 5% level, it had a few years ago.
Some people, may wonder about the reason why Brazilian authorities thought the world cup would be a good idea, or whether they expected such a violent demostrations because of it.Brazilians love soccer ,as much as they do with their beaches,their food,dances and their music and women,which make Brazil a very interesting place for tourism.
But no matter the expected outcome , and the nice people Brazilian are,this time has been different.The traditional easy going brazilians,went out to the streets to claim about better ways to spend public money
When Brazil got both the World cup (2014), and the olympic games (2016), those were years for hope. A new government led by President Inacio Lula Da Silva, was in place ready to move foward with the legacy of stability and economic progress left by the previous President Fernando Henrique Cardoso.
Today,the real problem is in the social debt Brazil still has ten years later with its own people . Education,health care facilities to mention the usual claims, are lacking of enough resources to be at a better level.Inequality is still high.
In the fisrt decade of this century,Brazil had a huge sucess to lift up from poverty up to 30 million people, who became part of the new middle class.But at the same time , Brazil did not realize the expectations those new middle class people would soon have about key services, and how the would demand for it to be fullfilled .
It is clear that there was a missmatch between social development, politics decisions and economics changes.The triangle of economic, social and politics variables did not work as expected either. But, Brazilians are smart enough to take into account that after the world cup is over, they will have to reset their priorities.
The decision to move forward with its own quantitative easing (QE),was not an easy one for the European Central Bank(ECB).It was not an easy one because ECB was born as the guardian of stability,with limited tools for what it was necessary for such a purpose. Besides the fiscal policy contraint of -3% deficit for the European Union countries,somehow forced ECB to keep monetary policy on the restrictive side to get close supervision and control of inflation and its trend.
But actually the issue is deflation,and who may have thought about it in the nineties, before the euro was in circulation?.
The fact is that rightly the ECB dropped the interest rate down from 0,25 to 0,15%,and will increase the money supply by 400.000 millions of euros, available for banks in the next months, to support credit and consumption.So far the inflation trend was in the deflationary direction from 1% to 0,7% for 2014.-
Now the question is whether will it be enough?:
There are some considerations to answer that question:
a. It is very important the so called "Forward guidance policy", to be applied.Markets have to be guided about what the ECB want them to do.Communications skills are decisive to make the impact of these changes in monetary policy stronger.
b.- The institutional framework which contraint ECB, do not allow to be too much prone on expansionary experiments.Would it be possible to go on with a QE-II, in case this QE-I fails?.As long as Martes get the answer as positive ,it will help to find the seeking path for stronger and faster recovery.-
c.- Will the euro depreciation be effective to generate inflation?.Depreciation ,is a change in relative prices between tradeable and non tradeable goods.Besides it increases both imported inputs cost, and consumer goods, but by the same token, other costs such as domestics one, in relative terms goes down.To become inflationary it has to be that its main impact is strong and persistent throught all the productive chain,such that all cost end up to be higher.
At first glance, it seems that the ECB has found the right moment to make this decision,and of course that it is a good signal of awareness about the real conditions of the Euro zone economy.As it was the case for the USA economy in 2012, to get the economy back on track it is more a matter of judgment, to decide to right time to apply corrective policies, than policies it self.