Brazil's Economy: The Risk of Default and The Dollar Rate Return to Pre-Crisis Levels

02/16/2017 - 10h42

A favorable global scenario for raw materials and the evaluation that the Brazilian government will undertake the reforms necessary to rebalance government spending and receipts have brought down the Dollar and the perception of country risk to levels of mid-2015.

In July of that year, the Dilma government registered a record budget deficit and admitted that it would not achieve its fiscal targets.

Two months later, Brazil lost one of the labels of a good credit risk.

On Wednesday (15), Brazilian CDS, a kind of insurance against default by a country, returned to their levels of May 2015.

Signs of recuperation in the world economy have helped to reduce the level of perceived risk globally and have elevated commodity prices.

The level of the Dollar, the currency that investors seek for protection, has fallen to R$ 3,06, the lowest level since June of 2015.

Translated by LLOYD HARDER

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