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Economy

Brazil's country risk is the lowest since 2013

08/09/2017 | 11h48

Brazil’s country risk (a sort of thermometer of a country’s likelihood of defaulting) has fallen to its lowest level since May 2013, at 194.8 points. Measured through the spread of a country’s Credit Default Swap (CDS), the indicator reflects greater optimism from investors regarding the Brazilian economy.

 

"The establishment of a less troubled scenario, the maintenance of the economic team and the economic measures considered positive by the market have favoured the improved price of Brazilian assets," said Haitong Bank chief economist Jankiel Santos, who added that overall improvements in the economy, both domestically and abroad, are behind the positive impacts in economic indicators.

 

The CDS spread is not the only indicator pointing to a more positive outlook for the economy. On Tuesday (8) morning, the stock market surpassed 68,000 points and the dollar exchange rate reached a low of R$ 3.12, further signalling the good mood of investors.

 

Reforms

 

The assessment by analysts is that, under the current context, the economic reforms tend to move forward and contribute to consolidating the resumption of growth.

 

"The trend we have seen in the last few days in the news is that [pension] reform has advanced and returned to the agenda of Congress, which brings further momentum to the market," Santos concluded.

 

According to Alex Agostini, chief economist at rating agency Austin Rating, the movement in the market is a reflection of improvements in the economic environment but, above all, of the expectation that conditions will continue to improve moving forward.

 

"Some domestic indicators have improved, such as inflation and debt," he commented, adding that "[Brazil’s country risk] should continue to fall because there is the expectation of falling interest rates and lower political risk”.



Font: BrazilGovNews
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