ASSESSMENTS

Is Brazil Barreling Toward an All-Out Economic Crisis?

MIN READApr 5, 2021 | 17:43 GMT

An electronic board shows the index chart at the Sao Paulo Stock Exchange after shares in Brazilian state oil giant Petrobras plunged amid news of a leadership shake-up on Feb. 22, 2021.

An electronic board shows the index chart at the Sao Paulo Stock Exchange after shares in Brazilian state oil giant Petrobras plunged amid news of a leadership shake-up on Feb. 22, 2021.

(NELSON ALMEIDA/AFP via Getty Images)

The Brazilian government is unlikely to implement fiscal reforms needed to emerge from its pandemic-induced recession ahead of the 2022 presidential election. This will, in turn, damage investor confidence and foreign investment inflows, which could delay Brazil’s economic recovery, worsen its fiscal problems and reduce trade with other nearby economies. Brazil’s politicians have used costly welfare programs to keep the economy and their approval ratings afloat during the pandemic, and are now adverse to putting a cap on public sector spending. Brazil’s fiscal sustainability is at risk due to rising inflation, high public debt and a recession triggered by the COVID-19 pandemic. ...

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