Fraga Warns ‘Combustible’ Situation Brewing in Brazilian Markets

Arminio Fraga has seen his share of financial crises in his 63 years: “Being an old-timer I have the memories and scars of events like this,” the influential former Brazilian central bank chief says.

And when he looks at Brazil’s finances today, he sees telltale signs that another one could be brewing amid the pandemic. He rattles them off rapid-fire: a tumbling currency, surging inflation expectations and a government scrambling to prevent jittery investors from whisking more money out of the country by cutting back the length of its debt maturities, selling a growing amount of one-day floaters. That debt strategy, in Fraga’s words, buys you time if you are doing something to improve the situation. If not, it’s just procrastinating.