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Capital Markets

LatAm round up: Brazil drops fiscal bombshell

Brazil has announced that its primary fiscal surplus is no longer 4.25% of GDP but 4.1%. According to a report by research outfit CreditSights, this move means that “investors will receive what just a few months ago seemed nearly impossible – an almost 1.1% of GDP erosion in the primary balance in just one year”. CreditSights reckons that even the new target might be optimistic. It lays the blame for the fiscal erosion on a massive spending binge by president Lula in an attempt to remain in power. The report concludes that Brazil’s fiscal structure “cannot be sustained over the long term”.

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