Covid-19 forces Brazil to seek money abroad

The Brazilian government increased the amount of money it has requested from international organizations — such as the National Development Bank and the Inter-American Development Bank — by 20 times this year, reports newspaper Folha de S.Paulo.

The USD 4.1 billion in funds is intended to increase the resources available to the Public Treasury and was obtained with favorable conditions. Foreign agencies became an important alternative to manage the country’s sovereign debt, as the fiscal scenario and political turmoil have chased investors away in recent months. 

As of March, foreign investors and funds withdrew BRL 54 billion and BRL 76 billion from the country, respectively. Meanwhile, Brazil’s default risk, measured by 5-year credit default swaps, jumped to 374 points in April — far above other Latin American nations such as Mexico, Colombia, or Chile.

The report points out, however, that even if demand for Brazilian public bonds stops entirely, the country would be able to fully honor its commitments for six months. The fact that 95 percent of the debt is issued in local currency also brings some comfort, as well as the lowest benchmark interest rates on record (3 percent).

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