Fiscal worries in Brazil, Argentina’s inflation dilemma

Fiscal concerns are growing in Brazil as Congress approved a bill yesterday which opens the door to more fiscal support (outside the limits of the spending cap). And pressure for higher public spending seems likely to escalate given the worsening virus outbreak and with former President Lula potentially in the running for the 2022 election. Elsewhere, inflation is (once again) on the rise in Argentina which may prompt the government to double down on distortionary policymaking in search of a near-term fix. However, that would only lead to greater issues further down the line.