LatinNews Daily - 23 April 2021

In brief: Moody’s warns about Brazil’s budget exceptions

* International ratings agency, Moody’s Investors Service, has raised concerns over the provisions for extra coronavirus (Covid-19) spending falling outside of the fiscal cap in Brazil’s 2021 budget. “The decision to exclude additional covid-related expenditure from the spending ceiling this year is negative for Brazil’s credit profile,” Samar Maziad, Moody’s lead sovereign analyst for Brazil, was reported as saying, adding that if “recurrent exceptions” are made for spending outside of the constitutional spending cap, “the credibility of the spending ceiling as a fiscal anchor” will be brought into doubt, “with negative implications for Brazil’s borrowing costs and debt dynamics”. Moody’s currently has a sub-investment rating of Ba2 on Brazil’s sovereign credit. The ratings agency’s warnings followed a deal between congress and the executive in Brazil, which put an end to weeks of deadlock over the budget by establishing that the government’s pandemic-related spending will not have to abide by fiscal rules. President Jair Bolsonaro went on to sanction the budget yesterday (22 April) with some vetoes, notably to the ‘emendas parlamentares’ funds for congress (to the tune of R$10.5bn [US$1.9bn]) and the government’s discretionary spending (R$7.9bn).