Fiscal risks loom largest in Brazil and Colombia

The improvement in government budget positions across Latin America over the past year or so has been driven in large part by temporary factors and is likely to reverse before long. As things stand, this is not a major concern for public finances in Mexico, Peru and, to a lesser extent, Chile. But the outlook for the public finances in Brazil and Colombia is more worrying as public debt burdens are already relatively large and the political backdrop isn’t conducive to sustained fiscal tightening.