ECR: Which way next for Brazil?

Jeremy Weltman
Published on:

LatAm safe-haven ranking 3rd
Euromoney Country Risk score 58.46
Three-year score change -4.47
Implied default probability (1-year %) 0.15
Experts taking part in Euromoney’s country-risk survey have cast doubt on Brazil as an investment destination in recent years. Besides Argentina and Venezuela, the two prominent defaulters, Latin America’s largest country has seen its risk score decline more than any other, to 58.5 out of a possible 100 points. Brazil’s risk score started to fall a long time before its economy slipped into recession this year. Experts lost faith in a growth-model driven by domestic demand with private consumption and investment weakening, and fiscal pressures exacerbated by World Cup-related public spending at a time when the commodity cycle has turned less favourable. Over the past three years, all but two of Brazil’s 15 survey indicators for political, economic and structural risk have deteriorated. An inflexible labour market, poor infrastructure, complicated tax system and stifling regulations explain the falling score for Brazil’s regulatory and policymaking environment – the one economic indicator sliding faster than any other this past year.