Brazil’s financial risk has dropped sharply in 2025, making it easier and cheaper for the government to borrow money from international investors.

The country’s risk score, measured by the five-year Credit Default Swap (CDS), fell from 214 points in January to about 150 points by late June.

This is a significant improvement, helping Brazil sell $2.75 billion in bonds this year, with investor demand much higher than the amount offered.

However, Brazil’s risk score is still higher than before the COVID-19 pandemic.

In early 2020, the CDS was as low as 92 points, and in May 2024, it briefly dropped to 99 points before rising again.

The current level shows progress, but also that investors remain cautious. Brazil’s economic challenges are serious.

The International Monetary Fund expects the country’s public debt to reach 92% of GDP in 2025.

Brazil Re-Gains Some Investor Trust but High Debt and Inflation Persist

This is much higher than the average for similar countries and means Brazil spends a large share of its budget just paying interest on its debt—close to 8% of its entire economy.

The government’s budget deficit is expected to be 8.5% of GDP this year, mainly because of these high interest costs and only modest economic growth.

Inflation is another big concern. Consumer prices rose 5.4% over the past year, above the central bank’s target of 4.5%.

Food prices have jumped, with potatoes up 18.3% and tomatoes up 14.3%. To fight rising prices, Brazil’s central bank raised its main interest rate to 15% in June, the highest since 2006.

Brazil’s $2 Billion Fiscal Modernization: States Drive Debt, Not Just the Federal Government

While this helps control inflation, it also makes loans more expensive for families and businesses, which can slow down the economy.

Growth is expected to slow in 2025. The government forecasts the economy will grow by 2.4%, but many analysts expect growth closer to 2.1%, down from 3.4% last year.

Agriculture remains a bright spot, with a record grain harvest of 328.4 million tonnes expected, including 164.2 million tonnes of soybeans.

The International Monetary Fund says Brazil needs to make changes to its budget rules and tax system to avoid even higher debt in the future.

More than 90% of government spending is mandatory, leaving little room to adjust if the economy worsens.

In summary, Brazil’s lower financial risk in 2025 shows that investors have more confidence, but high debt, persistent inflation, and slow growth remain big challenges.

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