BRAZIL MACRO: Time to act

Mar 1, 2014

It will take more than rhetoric for Brazil to regain credibility in global markets. A new fiscal plan might be part of the solution, but investors are likely to demand a lot more. By Thierry Ogier

Once again, it’s crunch time for Brazil’s policymakers.

Officials from Latin America’s biggest economy have, in recent months, embarked on yet another frenetic round of marketing, this time in a bid to convince the world that Brazil does not deserve to be ranked among the countries most vulnerable to rising US interest rates – the Fragile Five, as Morgan Stanley dubbed Brazil, India, Indonesia, South Africa and Turkey in a report last summer.

But it’s a message that not everyone is buying: at a congressional hearing in February, US Federal Reserve chairwoman Janet Yellen referred explicitly to Brazil as among the emerging markets most vulnerable to a reversal in capital flows.

President Dilma Rousseff and her team are likely to need more than words in trying to convince markets that their claims about Brazil’s economic health and prospects hold water. The finance ministry has already been spurred...

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