Brazil Flag National Debt

Brazil’s Debt Clock: Despite Strong Income National Debt Is Set To Soar. Here’s Why



R$ 9,859,596,929,719


Source: Brazilian Government Data

Last Updated: November 23, 2021

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Interest Payments Per Year
$154,974,160,000
Interest Payments Per Second
$4,914
National Debt Per Citizen
$10,174
Debt as % of GDP
103.49%
GDP Of Brazil
$2,032,810,000,000
Brazil Population
206,768,562

This guide goes into greater detail about what Brazil’s national debt is made up of, who manages it, and what the country’s credit rating is.

The National Debt of Brazil

Brazil’s gross public debt-to-GDP ratio was expected to jump around 100% at the end of 2020 as a result of a sharp increase in the primary fiscal deficit brought about by the coronavirus pandemic

Gross debt counts all the money that the country owes.

The Republic of Brazil has a state-owned oil company, which is a source of national pride and also a big source of income for the government. However, the debts of this company, Petrobras, are not included in the national debt figures.

The debts and payments made by Petrobras have been the source of political turmoil in recent years, resulting in the conviction of one former president and the ongoing trial of another.

The financial scandal that has emerged about the manipulation of state-owned enterprises shows that Brazilian politicians have become adept at hiding government debt and using public assets for personal gain.

Emerging revelations about the manipulation of state government budgets are also scaring away international investors from Brazil.

These problems, together with the increasingly unstable political landscape, mean that the Brazilian government has to offer high interest rates in order to attract buyers to its securities.

What Is Brazil’s Credit Rating?

Investors look to the credit rating of a country when they consider investing in it. This consideration extends to all types of investments, but it is particularly cogent for those investing in government securities.

The credit rating allocated to Brazil by the major agencies is shown in the table below.

AgencyRatingOutlook
DBRSBB (low)Stable
Standard & Poor'sBB-Positive
FitchBB-Negative
Moody'sBa2Stable

These ratings are not good and do not compare well with Brazil’s rivals. For example, Mexico has an A3 credit rating.

This means that international investors looking to buy Latin American government securities are more likely to buy Mexican bonds than those issued by the government of Brazil.

Who Manages Brazil’s National Debt?

The finance ministry of the federal government of Brazil is responsible for the national debt and answerable to the country’s parliament, which is based in Brazilia, the national capital.

A division of the finance ministry, which is called Tesouro Nacional is directly responsible for raising debt on behalf of the government.

The Banco Nacional de Desenvolvimento Econômico e Social (BNDES) is one of the world’s largest state-owned development banks and it has become a great source of income for the government. Its profit payments into the treasury reduce the need for the government to raise debt.

By the end of 2018, these payments will have reduced the national debt by 4.8% of GDP.  Despite this strong source of income, the national treasury projects that the country’s debt will continue to rise.

The main source of finance for the states of Brazil and local government comes from the National Treasury. However, they are also allowed to raise their own debt.

A recession in Brazil from late 2014 had a strong impact on the finances of state and local governments. In response to this crisis, the national treasury rescheduled loan terms on state debt, reducing interest due per year and extending loan periods by 20 years.

The debt instruments that the national treasury of Brazil sells can be categorized into two divisions:

  • Short-term debt instruments
  • Long-term debt instruments

Short-term debt securities are the LTN, which are treasury bills. These have maturities of less than a year and are issued to bridge the mismatch between the government’s regular expenses and the irregular pace of its income receipts.

The LTNs do not pay any interest, but they are sold at a discount and redeemed at full face value. The NTN-S Series is another short-term government security (described below).

What Securities Does the Brazilian Government Sell?

The majority of the long-term government securities that are currently in circulation offer a floating rate. The interest rate used for these bonds is called the Selic Rate.

The national treasury has instituted a policy to reduce the dominance of floating rate devices and enhance the profile of fixed-rate bonds.

Categories of Securities

The Brazilian government offers a confusing range of securities. However, they fall into the following broad categories:

  • Fixed-rate bonds
  • Floating-rate bonds
  • Index-linked bonds
  • Exchange rate-linked bonds

List of Bonds

LFT-AThere are a number of different floating-rate bonds, which pay interest at the Selic Rate, or that rate plus a margin. These include the LFT-A bond which can have a maturity of up to 15 years and gets repaid in monthly installments over its lifetime.

LFT-BThe LFT-B is another floating-rate bond with interest at the Selic Rate. It pays out all of its interest on the maturity date by adding that interest to the capital every year. These bonds can have a maturity of up to 15 years.

National Treasury NoteThe National Treasure Note (NTN) is an index-linked bond. The capital value of these bonds is increased each year on a basis that is linked to a different index according to the bond type.

NTN-A Series – The NTN-A Series includes a large number of variations that are all linked to the value of the US dollar. Some versions of this bond have a fixed interest rate, while others have a floating rate. Although the NTN-A Series is no longer being issued by the government, there are still many of these bonds circulating on the secondary market.  

NTN-B Series – The NTN-B Series is still issued by the government and can have maturity dates of more than one year. The capital amount rises each year in line with the Extended National Consumer Price Index (IPCA). These bonds have a fixed rate of interest for their lifetimes. Interest is paid in two installments per year.

NTN-C SeriesThe NTN-C Series is linked to the General Market Price Index (IGP-M). The bond pays a fixed interest rate for its lifetime, which can be a maturity term of any length over one year. Interest payments are made in two installments per year.

NTN-D Series The NTN-D Series is linked to the US Dollar exchange rate and pays a fixed rate of interest in two installments per year. The maturities of these bonds are all longer than one year.

NTN-F and NTN-H Series The NTN-F Series and NTN-H Series (there is no NTN-E Series or NTN-G Series) are both sold at a discount and pay a fixed rate of interest in two installments per year. The maturity dates of these bonds are all longer than one year.

NTN-I, NTN-M, and NTN-P SeriesThe NTN-I Series, the NTN-M Series, and the NTN-P Series are no longer being issued and they are not transferable, so you won’t encounter them on the secondary market.

NTN-R2 Series The NTN-R2 Series is linked to the US dollar exchange rate and pays a fixed interest rate of 12% each year on the remaining capital amount. The bond has a 10-year maturity and is repaid in 10 installments, each paid on the anniversary of the bond.

NTN-S SeriesThe NTN-S Series is a short-term financing instrument lasting for a minimum of one month. The note is both discounted and it also pays interest.

NTN-U SeriesThe NTN-U Series can have a maturity date of between one and 15 years. This bond is redeemed in monthly installments. Its capital value is linked to the Long Term Interest Rate (TJLP) and pays a fixed interest rate of 6.53% applied to the outstanding amount over its lifetime.

Holders of Brazilian National Debt

The chart below shows a breakdown of the categories of holders of Brazil’s national debt.

The non-resident participation in the market of less than 12% is relatively small for such a significant emerging market as Brazil.

Fun Facts About Brazil’s National Debt

  • You could wrap $1 bills around the Earth 8,189 times with the debt amount.

  • If you lay $1 bills on top of each other they would make a pile 229,746 km, or 142,757 miles high.

  • That's equivalent to 0.60 trips to the Moon.

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