The threat of energy shortages looms over Brazil once again. The country’s experience with electricity rationing in 2001/02 offers a useful guide about how the situation may pan out. We estimate that this episode knocked about 1%-pt off GDP growth, added roughly 2%-pts to inflation, and caused Copom to become more hawkish. This suggests that the risks to our current growth forecasts clearly lie to the downside, and that the central bank’s aggressive tightening cycle could ramp up.
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