RIO DE JANEIRO, BRAZIL – Brazil has room to implement a modest-sized new emergency aid, Fitch Ratings’ co-head of sovereigns for the Americas, Shelly Shetty, said during an online panel on emerging countries’ ratings.
Shelly pointed to a slightly better-than-expected picture for Brazil’s fiscal situation in 2020, although the framework is still very fragile. According to the executive, gross debt did not exceed 90% of GDP, as the agency had projected, for instance.
However, the co-head of sovereign ratings at Fitch stressed the need for Brazil to resume its reform agenda to get back on track toward fiscal sustainability. “There are several reforms in the pipeline, which are key to resume fiscal consolidation in the medium term,” she pondered.
When asked if the intervention in Petrobras could signal a populist shift in the government and consequently jeopardize the reform agenda, Shelly accepted that it is a negative event for the country’s perception, but stressed that it is too early to draw any conclusions.
Shelly also pointed out that in the same week in which the intervention in the leadership of Petrobras occurred, there were significant indications of a resumption of the reform and privatization agenda.
“If it’s to be more constructive, in the same week the intervention occurred, the government changed the tone by trying to shift the focus on the privatization [agenda] with the presidential decree on Eletrobras and with the reopening of discussions on the Emergency PEC (proposed constitutional amendment), a very important reform that allows the country to address the compulsory spending issue.”