RIO DE JANEIRO, BRAZIL – The Brazilian public debt had a jump of 27.2% between 2019 and 2021, reaching, at the end of the period marked by the peak of the coronavirus pandemic, 82%.
Even though the percentage of debt growth was below the average of emerging countries, 37.8% in these two years, a report by the Janus Henderson Group shows that Brazil now has one of the highest debt-to-GDP ratios in this group of countries, second only to Argentina.
“The pandemic has had a huge impact on government borrowing – and the consequences are destined to continue for some time to come. In Latin America, many governments have responded to the health crisis with ambitious fiscal policies to support their populations and economies, but in some cases, this spending will create challenges for public debt dynamics in the years ahead,” points out Bethany Payne, global bond portfolio manager at the manager.
However, the report shows that there were different approaches among the emerging economies. While Colombia and Chile increased their sovereign debt even more in the last two years, by 46.2% and 42.7%, respectively, Mexico managed a much more modest increase of 13.8% – the lowest among this group of countries.
In this same time frame, between 2019 and 2021, the report highlights that developed countries had a jump in their debts by 25.3%. However, the report highlights that debt service costs in emerging countries are much more expensive than in the wealthiest slice of the world.
“Debt service costs are also three times higher per dollar borrowed than the global average, so these countries are less able to afford the high debt levels seen elsewhere,” the document points out.
For Janus Henderson, the percentage of Brazilian debt compared to the economy should continue to rise until it reaches 90% of the GDP in 2025, taking the country to the front among the most indebted emerging countries.
By 2025, the manager predicts that Argentina’s debt will regress to 79% (from 87% in 2021). After Brazil, the country with the highest proportional debt would be South Africa, equivalent to 75% of the GDP.
With information from Estadão