Fiscal stability concerns rise in Mexico and Brazil

Economic analysts are raising concerns regarding fiscal stability in Mexico and Brazil. In Mexico, the rating agency HR Ratings warned that a projected 4% GDP deficit could become unsustainable if economic growth remains low. While the Ministry of Finance estimates annual growth of at least 2% to manage the deficit, HR Ratings has revised its long-term GDP expansion forecast down to 1.3% for 2026, suggesting a potential deficit of 4.6%.

In Brazil, political discussions are centering on significant austerity measures. Senator Flávio Bolsonaro has proposed cutting spending by 1.5% of GDP, equivalent to $40 billion, to address high public debt which has reached 83% of GDP. Economists from Goldman Sachs have described Brazil's budget deficit situation as a ‘time bomb’ if not addressed, noting that high deficits have contributed to restrictive monetary policies and high interest rates.