Energy and the fiscal deficit (Brazil)
The goal of zeroing the deficit by 2024 is already compromised.
So what does this mean for the energy business?
The sector is capital intensive. It means that the main cost at stake – amortisation of the investment – is likely to suffer from an anticipated rise in embedded interest that investors will demand. In other words, the “Brazil risk” is increasing and it will be quite reasonable to assume that energy prices will reflect this new condition.
Whoever designs a scenario considering this new development should have a better chance of making well informed decisions.