The worsening fiscal situation in Brazil, coupled with external uncertainties, has caused the country’s stock market to plummet from a record high to the worst performance among major world economies in 2024. This year, the Ibovespa index has dropped by more than 10%.
The poor performance extends to the currency market: the Brazilian real has also fallen by about 10% against the dollar in 2024, declining from R$4.85 at the end of last year to R$5.38 last Friday (14). The Brazilian currency's performance is only better than that of the Japanese yen.
This deterioration results from an increased perception of Brazil's risk among investors, especially after uncertainties regarding the management of economic and monetary policies. Since the beginning of the year, the country's risk, as measured by the five-year CDS, has risen by 18.67%.
To compensate for the risk, the market demands higher interest rates, and the rates on ten-year contracts in the country surpassed 12% this month. At the beginning of the year, they were at 10.36%.