The economic slump that accumulated in 2015 and 2016 a 6.7 % GDP fall was the worst in Brazil´s history and comparable to international episodes of recession during wartime and other unexpected shocks. Three years after the end of recession one might say that the country is going through the weakest economic recovery in its history. Even when Brazil faced serious external constraints, its economic growth accelerated faster after a downturn. Since 2015, however, several analyses have stressed that more market-oriented (or supply side) policies and the reduction of public spending would boost private investment and provide a sustainable growth path. However, after the economic downturn, the Brazilian economy is growing less than 2% per year. In opposition to the mainstream interpretations focused on supply-side policies, we adopt an alternative standpoint in which growth is determined by autonomous components of aggregate demand, such as public spending, and private investments responds to economic activity through the accelerator mechanism. We therefore argue, first, that the economic crisis and its slow recovery are the result of some profit-led policies during Dilma Rousseff’s presidency and the revival of an orthodox austerity after 2015 that undermined the public expenditure, specifically through social transfers, which was key to boost consumption, investment and Brazilian growth in the 2000s. In addition, we suggest that the current decrease in interest rates may result in (low) growth but concentrated in credit consumption from the upper classes. However, due to the tightening in interest rate differentials regarding the international rates, this stimulus can be interrupted in anytime.
