Brazilian debt now seen more risky than Lebanon

Brazil flag and the Cedar tree of Lebanon . nearly twice as many Lebanese live in Brazil than in Lebanon
Brazil flag and the Cedar tree of Lebanon . Nearly twice as many Lebanese live in Brazil than in Lebanon. On a per capita basis Lebanon is one of the highest indebted nations and yet its debt poses lower risk than Brazil’s

Make of this what you will, but Brazil is now seen to be a bigger credit risk than Lebanon – at least according to movements in the credit default swaps market.

The cost of insuring Latin America’s largest economy against default has jumped above that for the small Middle Eastern country, which is trying to rebuild and return to a sense of normality following the 1975-1990 civil war.

The five-year CDS on Brazilian government debt climbed another 14 basis points on Tuesday to 444.83bps – its highest level in nearly seven years.

This compares to the 415.07bps that the CDS for Lebanon are currently trading at.

If there is ever a case to be made that CDS prices can be quite meaningless, this is probably it.

While Brazil has its shares of problems – a deepening recession, a growing domestic political crisis and public finances that are in disarray, comparing its credit worthiness to Lebanon is questionable.

For starters, Brazil has $360.44bn in foreign reserves at the end of July, according to Bloomberg data. That’s plenty of cushion to cover the country’s foreign currency sovereign debts.

The Brazilian economy – for all its woes – remains among the world’s 10 biggest.

Still, the CDS shift is yet another sign of serious nerves over Brazil. With its currency, the real, plunging to a new record low on Tuesday, yields on Brazil’s 10 year bonds have also surged to hit 6.150 per cent.

That’s not far off from the 6.208 per cent for Lebanon’s 10 year dollar debt.

FINANCIAL TIMES

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  • arzatna1

    I guess Brazil needs a Lebanese like Riad Salameh to fix it.

    • 5thDrawer

      Why not? They already have the gangs … :-))))

  • 5thDrawer

    Dear ‘Financial Times’ … The ‘Market Money Manipulators’ play on a Roulette Wheel for ‘THEIR profits’ … not for the good of people or the countries they live in, and the ‘charts&graphs’ of evaluations of ‘worthiness’ rarely are reflected in the ‘Relative Value’ of the USA BIG BUCK.
    You might just as well ask why the Canadian $ is only 0.72 in YOUR MARKET minds … We HAVE more than the USA except bodies, and ALL the ‘Tech’ and Education too. We even have Beer with better taste and more alcohol. (let’s not forget the wood and pork, either)
    And Lebanese don’t even use their own currency any more. It’s not even tradable in ‘Your Market’. They only want USA BIG BUCKS for everyday things like apartment rents and food … and guns .. and, well anything.
    (always strange that change in a store comes back as LL … maybe they think everyone can spend it in Syria..)
    SO …. WHY ‘WONDER’ AT ALL ABOUT BRAZIL ???
    Don’t you KNOW?

    • arzatna1

      It looks like Canada needs an Obama to fix its dollar , just like Brazil needs a Salameh to fix its debt.
      As you may recall the Canadian Dollar was worth more than a US dollar in November 2007 , months before Obama assumed the presidency.
      I am sure Obama will be looking for something to do in less than 2 years . Reserve him from now , but make sure you don’t give him any red ink , because he may replace the queen with red lines.

      • libnan1

        They (Canada) can have Obama and Michelle too. The only reason the $ is strong is because the other nation are screwed up and that has nothing to do with Obama. Actually Obama inflated our mighty buck.
        Lebanon needs the Great at the helm to move thing along, return the land Hariri stole from it’s owners in Beirut, privatize all utilities and trash collection. Then Lebanon’s economy will compete with best in the world.

        • 5thDrawer

          Isn’t that wonderful trash collecting ‘privatized’ now?? Ta-Dah. (duhhhh ..)

        • arzatna1

          The so called Great has never been tested in handling economic issues . I think he should retire for good and spend the rest of his life with his grand kids . People with his medical condition put the country at a huge risk specially if they lose their temper when they need badly their medication.
          I am sure you know what I am talking about !!!

        • 5thDrawer

          We don’t want a ‘President’. And if it cost anywhere near a tenth of what you people spend on a simple ‘election’ process, the Mounties would be called in.

      • 5thDrawer

        Only about 8 months ago it was ‘par’. Actually, if you watch the people going in and out of a ‘western union’ office, (a usa company that tracks money-flow for the ‘homeland security’ gang) , you can probably figure that the ‘families’ of all the refugees of MANY countries who are now making money in Canada and sending some of it ‘home’, are once again starving because of that dollar difference. Voila.