The year 2025 begins with an inevitable comparison between the current and the moment before . Since then, the private sector has strengthened, but conditions in the public sector justify the recent worsening in risk perception.
In the last ten years, the Brazilian economy has changed a lot, which should avoid a slowdown as sharp as it was back then. There was an increase in efficiency in several segments, and the private sector broke records in the trade balance with the rest of the world. Despite the high prices of , we are far from the boom of the 2000s and the risk of a sudden slowdown of 2014.
The productive sector is less indebted, although investing less and more selectively. The continued concern, both from foreigners and residents, could be converting into more productive investments here.
The private sector increased its . In energy, the market advanced over the regulated market (from a quarter to a third of the total). There is more private investment in , . The company was restructured based on the new one and is less dependent on subsidized funding and government contracts. There were sales of public assets, with private actors managing long-term contracts, protected from , but with investment, universalization and service level targets.
The expansion of access to capital markets and the reduction in refinancing costs contributed to the deleveraging of large companies, which, on average, is less than half the level of ten years ago.
With fewer credit subsidies, the capital market now accounts for more than 60% of corporate credit; ten years ago, it was only half that. They increased their net worth fivefold, and became the main asset within the fund industry, surpassing stock allocations for the first time; issuers’ risks have been priced in deeper and more diversified markets and distributed among a greater number of investors.
In corporate banking credit, the momentum has also been strong, with emphasis on card receivables anticipation lines, which are very dependent on demand. Public guarantee funds have supported credit for micro and small companies since the pandemic, with default levels still low.
People are more in debt than they were ten years ago. In addition to the ease of technology, there are more competitors in a market with more abundant liquidity. The number of active credit cards grew 2.5 times compared to 2014.
However, it is as resilient as it was until 2014. The rapid expansion of the less cyclical services sector, reinforcing the current overheating of the economy. At this moment, the rate is even lower, at a historic low, and tends to take longer to adjust to the rate.
But in the public sector the story is very different. The challenge of consolidating public accounts has not yet been overcome.
Institutions have failed to sustain , allowing the growth of public spending to outpace the economy’s growth rate. The value of and is close to 1% of , without evaluation or proposal for structural reformulation. We remain, now more dependent on dividends from state-owned companies and oil income.
Budgets remain rigid, with mandatory expenses indexed and linked, with no counterpart in better services. The did not stabilize after the reform. The recent effort to permanently increase revenues (1% of GDP) appears to have been exhausted, without further support in Congress, and was not enough to cover the accelerated pace of expenses. The grew from 5.7% to 6.9% of GDP in ten years.
GDP jumped more than 20 percentage points in this period, with a growth trend until the next decade. If ten years ago only a quarter of the debt was linked to floating rates, now this percentage has reached half. And the huge problem still remains unresolved.
Although they are better protected by , the use of public funds and subsidized credits have been reactivated. These burden the public debt, although we believe that, this time, the short-term impact will not reach half of that observed in the last fiscal crisis.
The, since the pandemic, which induces higher global interest rates than we experienced ten years ago. In other words, the external situation is helping less and posing more risks.
The reversed political cycle, with stronger spending at the beginning of the administration, should result in less growth in the election year. The big uncertainty is the possibility of new fiscal impulses. The growing imbalances in the public sector and the burden of its financing on the private sector explain the worse risk perception, the high interest rates and the depreciated real. Market discipline is taking its toll.
There is still time to reverse the drag of the crisis of confidence on the real economy. The solution lies within the public sector, involves a long-known diagnosis and, necessarily, the choice of cost containment.
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