For much of the end of 2021, markets showed great concern with Brazil’s fiscal balance. The main reason for this distress came in the shape of a constitutional amendment bill allowing the federal government to cap its court-ordered debt repayments (precatórios) for this year, freeing up space on the budget and essentially making a mockery of Brazil’s federal spending cap.
While seeking assurances that the precatórios bill was a one-off, the markets’ worry is that the measure sets a dangerous precedent and renders spending cap rules useless.
On the one hand, Economy Minister Paulo Guedes continues to tell investors…
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