Brazil’s Debt Grows by Over 3% in a Single Month

In May, Brazil’s national debt rose by 3.10% to R$6.912 trillion ($1.257 trillion), as announced by the Treasury today.

The increment included R$6.627 trillion ($1.205 trillion) in internal debts and R$285.47 billion ($51.9 billion) in external debts.

Internal debts climbed by 3.16%, whereas external ones saw a growth of 1.77%.

The 3.1% increase in Brazil’s public debt in May 2024 alone represents half of the total annual increase in 2022, which was 6.02%

This indicates a substantial monthly surge in debt relative to the annual trends previously observed.

The composition of the debt at the end of May featured various types of bonds:

• 22.68% were fixed-rate,
• 29.43% indexed to price indices,
• 43.78% with floating rates, and
• 4.11% linked to foreign currencies.

The Treasury aims for floating rate bonds to constitute 40% to 44% by the end of 2024.

Helano Dias, who manages debt operations, noted that the current figures are close to these targets.

The increase in public debt during May was due to R$146.71 billion ($26.67 billion) in net issuances and R$61.38 billion ($11.16 billion) from accrued interest.

Additionally, the liquidity reserve—a financial buffer for debt obligations—expanded by 16.7% to R$ 1.032 trillion ($187.64 billion). This amount was 4.96% higher than the previous year.

Background

Lula’s third term is characterized by increased public sector employment, higher subsidies, and growing debt, moving away from the previous market-driven reforms.

This shift back to a government-centered economic model has led to reduced profits and dividends across state enterprises.

Debt levels in these enterprises climbed by 8.9%, while profits of key state companies fell by 24% within a year.

Petrobras saw a 33% drop in earnings, and dividends from major state companies declined by 42%, highlighting the financial difficulties.

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