Brazil's Country Risk Falls to Lowest Level since 2010

5-year CDS falls below 100 points; dollar back to US$ 4.06

São Paulo

Brazil's country risk measured by the five-year CDS (Credit Default Swap) reached its lowest level in nine years on Monday (16). After nine consecutive declines, the index is 98 points, the lowest since November 2010, down 3% in the session.

The CDS acts as an informal thermometer of investor confidence in economies, especially emerging ones. If the indicator rises, it is a sign that investors fear the country's financial future; if it falls, the message is the other way around: it signals increased confidence about the country's ability to pay its debts.

Ibovespa in São Paulo. (Foto: Renato S. Cerqueira/Futura Press/Folhapress) - Futura Press/Folhapress

In 2010, Brazil had the good-paying seal granted by the rating agencies S&P, Fitch, and Moody's, another seal followed by international investors when deciding to invest in emerging countries, considered riskier.

Last Wednesday (11), S&P raised from stable to positive the outlook for Brazil's long-term foreign currency rating, today at BB- (three notches below the good payer stamp). On the same day, the Central Bank cut the basic interest rate from 5% to 4.5% per year, a historic low.

While it expects the country's debt-to-GDP ratio to continue to grow over the next three years, the US agency cited the prospect of improving the country's fiscal position following the approval of the Social Security reform and the prospect of a continued fiscal agenda. 2020, despite the risk of setbacks continuing material.

Translated by Kiratiana Freelon

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