Brazil using sticking plasters as public finances worsen

The recent sharp deterioration in Brazil’s public finances has forced Finance Minister Fernando Haddad to outline further fiscal tightening measures, but we doubt that the government will do enough to prevent public debt from rising in the coming years. While that won’t create immediate problems, it will result in a higher country risk premium and means that Copom will almost certainly keep interest rates on hold for the remainder of this year (if not longer).