Brazil's mounting debt: what are the risks?

The fiscal position of the Brazilian government has deteriorated rapidly over the past year, and is likely to get worse before it gets better. This will drag on the economy, even if a sovereign default is avoided. The debt dynamics of many corporates are even worse; high levels of US dollar denominated debt and a tumbling currency are straining corporate balance sheets. Fiscal retrenchment, corporate defaults and job losses will be a drag on the economy in the short to medium term, while faltering public and private investment will have long lasting repercussions for growth.