Barbosa, from Natura, says that Brazil will not go bankrupt, but may grow little without adjusting the accounts

“Brazil doesn’t break.” The phrase came from the chairman of the board of Natura, Fábio Coletti Barbosa, in an interview with the BBC, according to Times Brasil. For him, the country has no risk of an insolvency crisis under Lula's new mandate. The diagnosis, however, comes with a caveat: the economy could be stuck at low growth.

Barbosa knows the financial system from the inside, having presided over Santander Brasil and Febraban. According to Times Brasil, he separates two issues: the country's solidity, which is associated with external accounts, the autonomy of the Central Bank and sectors such as oil, agriculture, energy and mining, and fiscal dynamics, which can slow down activity.

The central point is the imbalance in public accounts. According to the executive, if the country does not face this problem, it may continue to grow less than it could. He rules out a collapse, but the scenario he describes is one of weak expansion, not rupture.

Barbosa points out two pressure channels. The first is the effects of public spending on activity. The second is high interest rates, which also weigh on the economy. In his view, the two factors add up and limit the pace of growth.

The message is in line with the fiscal responsibility agenda. Confidence depends on having accounts in order, and not just on the solidity of external foundations. Coming from a private sector executive, the warning reinforces this thesis, although the interview, as reported, does not detail specific measures.

What is at stake is the difference between avoiding a crisis and returning to growth. A country can avoid the risk of collapse and still make little progress. It is this distinction that Barbosa places at the center of the debate.

What changes for the investor

The message reinforces the weight of the fiscal agenda in the valuation of Brazilian assets. When the risk of insolvency falls off the radar, the focus tends to migrate to the growth capacity and the trajectory of interest rates, variables that influence the stock market, exchange rate and fixed income. The situation described by Barbosa, of high interest rates and weak activity, tends to weigh more heavily on companies dependent on the domestic market, while companies linked to the sectors he cites as fundamentals may react differently. This article does not recommend buying or selling and does not project prices. The point of attention is to monitor whether fiscal policy advances, as it defines what the investor needs to price in the coming years.

Automatically translated from Portuguese.