In 2024, Brazil witnessed significant changes in its economic stability, with its risk score jumping by 33 points to 166.
This measure, indicating the likelihood of a loan default, is critical for investors assessing market stability.
Such a rise makes Brazil second only to Argentina among G20 nations in terms of increased risk; Argentina’s risk score spiked by 1,133 points.
Understanding the Credit Default Swap (CDS) is essential here. This instrument forecasts the probability of default over five years.
At the year’s start, while many countries reduced their risk scores—most staying below 100—Turkey was the exception, decreasing by 9 points.
Yet, data for the European Union, Russia, and Canada were not compiled, leaving gaps in the global overview.
Brazil’s risk reached its peak in 2024, the highest since November 2023, due to uncertainties in fiscal policies under President Luiz Inácio Lula da Silva.
Despite a 121-point decrease in 2023, recent trends indicate a shift. Other countries like the U.S. and the U.K. also saw increases.
Brazil showed economic strength in 2024 with job growth, GDP expansion, and lower inflation rates.
These factors helped reduce the Selic rate, Brazil’s main interest rate. Meanwhile, Argentina and Colombia faced economic declines.
Looking ahead, financial markets are cautious about Brazil’s long-term stability.
After a low of 90 points in February 2020 under Jair Bolsonaro’s presidency, Brazil improved following Pension Reform.
With the return of President Luiz Inácio Lula da Silva, the trend reversed.
Lula’s third term is characterized by increased public sector employment, higher subsidies, and growing debt, moving away from the previous market-driven reforms.
Brazil’s Country Risk Among Fastest Rising in G20
With the health crisis and war tensions eased, attention turns to Brazil’s rising debt and the government’s focus on increasing taxes over cutting expenditures.
Experts express concerns about relying too much on tax increases without significant spending cuts.
Recent debates have highlighted these fiscal approaches, but concrete actions are still pending.
Investors eyeing Brazil’s policies are wary as President Lula criticizes the Central Bank’s 10.50% Selic rate, raising concerns about fiscal and monetary strategies.
This will greatly impact Brazil’s economic future and global standing, highlighting the intricate link between policies and market responses.
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