Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Government spending, macro headwinds threaten Brazil's economy: ex-central bank chief Fraga

Published Aug 29, 2023 01:24PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A view shows the Central Bank headquarters building in Brasilia, Brazil August 25, 2021. REUTERS/Amanda Perobelli/File Photo
 
USD/BRL
+0.66%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Lisa Pauline Mattackal

(Reuters) - Insufficient government spending cuts, rising global interest rates and tighter liquidity place Brazil in a risky fiscal situation, a former governor of the central bank said on Tuesday.

Reform efforts including a new fiscal framework designed to limit escalating public debt and plans for tax reform are a welcome step in the right direction, but likely insufficient, said Arminio Fraga, who helmed Banco Central do Brasil (BCB) from 1999 to 2002.

"I think it would be imprudent to count on 'blue skies and good weather' going forward, sadly, we're not in a position to relax," Fraga told the Reuters Global Markets Forum (GMF).

He said the government was not even considering classic expenditure cuts, as it also faces hurdles passing reforms through Congress.

"This leaves a fragile fiscal situation, in my view, into the distant future," Fraga said.

As the world's biggest central banks signal 'higher for longer' interest rates, Fraga noted the tightening supply of available capital has historically darkened the outlook for emerging market investments and growth.

Brazil's central bank, meanwhile, cut interest rates in August by 50 basis points to 13.25%, and policymakers have signaled a similar pace of easing in subsequent meetings.

Despite August's rate cut being more aggressive than most expected, Fraga noted the bank remains understandably cautious and will need to gauge the impact of lower rates on a meeting-by-meeting basis.

He does not expect a favorable foreign investment backdrop for Brazil even as investors shift away from China, given that existing fiscal reforms may already be priced in.

Government spending, macro headwinds threaten Brazil's economy: ex-central bank chief Fraga
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email