Fitch: Macroeconomic Adversity, Rampant Expenditures and Debt in Brazilian State's Election Year
SAO PAULO--(BUSINESS WIRE)--The continued lackluster domestic economy performance in 2014 should pressure the state's revenues and operating margins, according to a new Fitch Ratings report.
'The pace of investments and new debt is directly linked to the state's capacity to accommodate expenditures - especially the ones related to personnel - in order to meet fiscal targets imposed by the Federal Government. The majority of Brazilian subnationals continue to fulfill the fiscal goals imposed by the Federal adjustment programs despite the meager results presented in 2013 and the expectation of economic stagnation in 2014,' said Paulo Fugulin, Associate Director.
The Fiscal Responsibility Law has been challenged by ad-hoc debt authorizations granted to states also in 2013. States are facing rising personal expenditures and Fitch does not expect material changes following the state elections to be held in October 2014.
Further federal discussions should take a slow pace in 2014, despite the need for a coordinated change. Financial forecasting accuracy of states has been undermined by the recent economic slowdown that affected not only the level of tax revenues but also the amount of federal transfers.
These and other conclusions are detailed in the '2014 Outlook for Brazilian States'.
Additional information is available at 'www.fitchratings.com'.