Brazil’s debt rises 27.2% in the pandemic and is among the largest in emerging markets

Brazilian public debt jumped 27.2% between 2019 and 2021, reaching 82% at the end of the period marked by the height of the coronavirus pandemic.

Although the percentage of debt growth has been below the average for emerging countries, 37.8% in these two years, a report by the manager Janus Henderson Group shows that Brazil currently has one of the highest debt/GDP ratios in this group of countries. , second only to Argentina.

“The pandemic has had a huge impact on government borrowing – and the fallout is destined to continue for some time to come. In Latin America, many governments have responded to the health crisis with ambitious fiscal policies to support their populations and economies, but, in some cases, these expenditures will create challenges for public debt dynamics in the coming years”, points out Bethany Payne, portfolio manager manager’s global securities.

The report shows, however, that there were different approaches among the emerging ones. While Colombia and Chile have increased their sovereign indebtedness even further in the last two years, at 46.2% and 42.7%, respectively, Mexico achieved a much more modest increase of 13.8% – the lowest among this group of countries. .

In this same time frame, between 2019 and 2021, the report highlights that developed countries had a jump in their debts of 25.3%. The report highlights, however, that debt service costs in emerging countries are much more expensive than in the richest part of the world.

“Debt servicing costs are also three times higher per dollar borrowed than the global average, so these countries are less able to afford the high levels of debt seen elsewhere.”

forward perspective

And, for Janus Henderson, the percentage of Brazilian debt in relation to the economy should continue to rise until it reaches 90% of GDP in 2025, taking the country to the forefront among the most indebted emerging countries.

By 2025, the manager predicts that Argentine debt will regress to 79% (from 87% in 2021). After Brazil, the country with the highest proportional indebtedness would be South Africa, with the equivalent of 75% of GDP.