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Brazil: The next 10 years
Fixing the economic mess
At one level the diagnosis of Brazil’s economic problems is simple. For years the country has consistently run excessively large public-sector deficits – which have pushed up debt levels in an unsustainable manner. The consolidated public-sector budget deficit (including federal, state, and local governments, the central bank, and state enterprises other than Petrobras and Eletrobras) rose from 2.5% of GDP in 2013 to over 10% in early 2016. There has been some improvement more recently, with the deficit going down to 7%-8% of GDP, but the imbalance is still massive and is really a structural, rather than a cyclical phenomenon. Lower interest charges on the public debt played a part in lightening the load, but they were in any case expected to begin to rise again in line with global trends.
