Economy

With low interest rates and Social Security reform approved, Brazil Debit Risk decreases

However, a change in Brazil's credit rating by the main agencies depends on more robust economic growth

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  • It was after May 2013 that protests broke out, the political scenario became more complicated and the economy began to collapse;
  • Investors expect credit bureaus to boost Brazil’s rating.

The five-year Credit Default Swap (CDS), a (derivative) credit agreement that protects Brazilian sovereign debt from default and thus serves as a thermometer to measure this risk, reached 117 points, the lowest since May 13. 2013, according to information from the newspaper Folha de S.Paulo.

It was after May 2013 that protests broke out, the political scenario became more complicated and the economy began to collapse.

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Folha’s journalists Júlia Moura and Isabela Bolzani point out that the highest level of Brazil Debt Risk ever reached was 494 points in 2015.

“At the time, the Brazilian economy went into technical recession with the fall of GDP and the risk agency Standard & Poor’s (S&P) withdrew the good-paying seal from Brazil. Since then, investment valuation has fallen three more times, indicating increased default risk, “they wrote.

“As the index returns to low levels, investors expect credit bureaus to boost the rating. According to the agencies, however, the change in the credit rating depends on more robust economic growth,” they add.