Brazil: How High can Public Debt Go?

Juan Carlos Rodado Économiste Amérique latine, Natixis. Contact : juan-carlos.rodado@us.natixis.com.


Brazil needs to fix its fiscal situation. The new administration has made progress with the adoption of a dark but realistic fiscal target. The federal spending cap proposal and discussion on social security reform go in the right direction but tax hikes will be probably required. The road to rebalance fiscal accounts will not be easy given the necessity to adopt unpopular measures without growth by a government that was not elected. While Brazilian assets registered an impressive performance in 2016, Michel Temer's government has narrow window to prove it can stabilize the trajectory of public debt. We explore in this article the new fiscal policy, public debt drivers and contingent liabilities.


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