Problems with Brazil's Financial System
Observations of Risk:
While systemic risk has been in a decline since the peak of the 2008 Financial Crisis, like all financial systems, the Brazilian Financial System is at risk from both internal and external factors. These factors coupled with developmental issues have created a higher risk environment for Brazil’s financial system in the most recent years. Standard & Poor’s recently awarded Brazil a credit risk of four, on their one to ten scale.
A Standard & Poor’s Banking Industry Country Risk Assessment (BICRA) of four is comparative to countries such as Mexico, Italy, Taiwan, Peru, and South Africa. The four is an average between the awarded economic risk of five and industry risk of three. Standard & Poor indicated that their belief is that Brazil is ‘high risk’ in economic resilience, ‘low risk’ when it come to economic imbalances, and ‘high risk’ in regards to credit risk in the economy. According to a recently published Wall Street Journal article, Standard & Poor’s is in consensus with the International Monetary Fund in believing that enduring external shocks will challenge fiscal performance. While it is a positive sign that professional opinion indicates that Brazil is a low risk in regards to economic imbalances, it is of great concern that Brazil is high risk in terms of their economic reliance and in regards to their credit risk within the economy.
While Brazil is an emerging market with a diversified and intricate economic structure and high domestic demand that is attracting global investors and satisfying many capitalistic ventures domestically, Brazil is still a “low-income” nation. They have political and monetary leaders in place that have been determined to further the growth of this emerging market for nearly twenty years, by lowering inflation, improving foreign investment, and maintaining growth; yet, they consistently underperform the gross domestic products (GDPs) of other similar emerging markets. This is in part because
While systemic risk has been in a decline since the peak of the 2008 Financial Crisis, like all financial systems, the Brazilian Financial System is at risk from both internal and external factors. These factors coupled with developmental issues have created a higher risk environment for Brazil’s financial system in the most recent years. Standard & Poor’s recently awarded Brazil a credit risk of four, on their one to ten scale.
A Standard & Poor’s Banking Industry Country Risk Assessment (BICRA) of four is comparative to countries such as Mexico, Italy, Taiwan, Peru, and South Africa. The four is an average between the awarded economic risk of five and industry risk of three. Standard & Poor indicated that their belief is that Brazil is ‘high risk’ in economic resilience, ‘low risk’ when it come to economic imbalances, and ‘high risk’ in regards to credit risk in the economy. According to a recently published Wall Street Journal article, Standard & Poor’s is in consensus with the International Monetary Fund in believing that enduring external shocks will challenge fiscal performance. While it is a positive sign that professional opinion indicates that Brazil is a low risk in regards to economic imbalances, it is of great concern that Brazil is high risk in terms of their economic reliance and in regards to their credit risk within the economy.
While Brazil is an emerging market with a diversified and intricate economic structure and high domestic demand that is attracting global investors and satisfying many capitalistic ventures domestically, Brazil is still a “low-income” nation. They have political and monetary leaders in place that have been determined to further the growth of this emerging market for nearly twenty years, by lowering inflation, improving foreign investment, and maintaining growth; yet, they consistently underperform the gross domestic products (GDPs) of other similar emerging markets. This is in part because