Zero Hedge:
So what’s the takeaway besides the fact that Brazil is, for lack of a better word, screwed (because we already knew that)? Well remember, Brazil is representative of the problems facing EM as a whole. Slumping commodity prices, currency carnage, FX pass through inflation, sensitivity to decelerating Chinese demand and to Beijing’s yuan deval, Brazil has it all – they even have a seemingly intractable political crisis, and as we never tire of pointing out, idiosyncratic political risk factors have become an important part of the EM calculus (see Turkey and Malaysia for instance). In short, the country is a proxy for EM as a whole. With that in mind we close with what Barclays says are the wider implications of Brazil’s deteriorating fiscal picture and challenging debt dynamics:
„The prospect of such deterioration is likely to lead to a further sell-off in Brazilian assets and could create contagion – especially to vulnerable EMs – given Brazil’s systemic importance.“