Brazil faces fiscal crunch, prompting shift to inflation‑linked bonds

Several leading Brazilian asset managers warn that a deep fiscal weakness and high probability of recession by 2027 are reshaping fixed‑income strategies. Bruno Cordeiro of Kapitalo Investimentos, João Landau of Vista Capital and Ruy Alves of Kinea Investments argue that the risk of a fiscal adjustment without a major effort makes post‑fixed CDI‑linked bonds unattractive, favouring inflation‑linked Treasury securities (NTN‑B/IPCA+) and short‑term prefix bonds. Landau notes the Treasury’s signal that rates must fall or the government will “break”.

In a separate interview, former Economic Policy Secretary José Roberto Mendonça de Barros stresses that governance problems and fiscal imbalances are paralysing the country. He projects Brazil’s GDP growth at only 1% by 2027, warns that high interest rates are squeezing companies, and says an effective fiscal adjustment in the first year of the new administration is essential to avoid a worsening slowdown.