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Why Brazil Must Build a (Fiscal) Wall

By Otaviano Canuto

Without reforms, financial markets’ optimism may crumble – and bring the house down.

Judging by the reaction of financial markets, the Brazilian economy started the year at high speed. The real is among the world’s best-performing currencies so far in 2019 and the main stock market index Ibovespa hit a string of record highs leading into last week, when it broke the 97,000-point mark. Future interest rates have fallen sharply. 

Foreign investors are buying in as well. The premium demanded as compensation for the inherent risk of buying Brazilian bonds, the Credit Default Swap rate (CDS), that in September was above 310 basis points has fallen to around 180 basis...

Read this article on the Americas Quarterly website. | Subscribe to AQ.

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