Brazil heads deeper into the fiscal mire

It is, in truth, too soon to expect any improvement in Brazil’s public finances as a result of the belt-tightening measures introduced over the past few months, but the fact that the fiscal position has actually deteriorated underlines the scale of the challenge now facing Finance Minister Levy as he attempts to narrow the country’s yawning budget deficit at a time when the economy is weakening. This is a path that has already been trodden by several developed economies since the global financial crisis – and their experience suggests that investors in Brazil should now brace themselves for a series of missed targets for deficit reduction.