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Delayed fiscal cuts could spur capital flight from Brazil, Fitch says


According to Market Intelligence, December 2022


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Delayed fiscal cuts could spur capital flight from Brazil, Fitch says

The outcome of presidential elections in Brazil could trigger investors to shift capital out of the country as doubts arise about next government's ability to implement fiscal tightening, Fitch Ratings said.

Todd Martinez, an analyst for Latin America at the rating agency, said there is a lot of uncertainty around the first and second electoral rounds. He added that political risks could eventually affect the country's BB credit rating, Folha de S. Paulo reported.

"If the market loses its patience with the pace of fiscal adjustment, and if the government has to fund itself in the short term, that can add pressure on the rating," he said during a Sept. 6 conference in New York.

"Some candidates are more orthodox on the spending ceiling and more vague in relation to other issues, but there are others who talk about getting rid of the ceiling and do not have credible alternatives," Martinez added.