Allianz Trade improves Brazil's credit rating in country risk report.

247 - Allianz Trade released on Monday (3) the second edition of the Country Risk Atlas, a study that assesses the credit risk of various countries based on economic, political and sustainability factors. According to the publication, 48 economies were reclassified to higher categories in 2024, more than double the number recorded in the previous year. Brazil, which was in the Sensitive Risk category (B3), was promoted to Medium Risk (B2), reflecting the strength of its agricultural sector, the reduction in unemployment and the growth of industrial and energy production.

According to Luca Moneta, senior economist for emerging markets at Allianz Trade, the resilience of the Brazilian economy is underpinned by the robust performance of agribusiness, the stability of the labor market, and the strength of domestic consumption, factors that helped boost GDP growth in 2024. Furthermore, strategic sectors such as automotive and industry in general maintained expansion, despite increased Chinese imports, which threaten domestic production.

Global expansion and emerging risks - The improvement in country risk was a global trend in 2024. The survey indicates that 17% of global GDP is concentrated in economies that were positively reclassified, notably Latin America (13 countries), Emerging Europe (10), and Asia-Pacific (9). However, some Middle Eastern countries, such as Bahrain, Israel, and Kuwait, had their ratings reduced due to factors such as geopolitical instability and oil prices below the fiscal breakeven point.

Allianz Trade CEO Aylin Somersan Coqui emphasizes that the overall improvement in country risk is strongly tied to short-term indicators and, therefore, may be reversible. “While the global economic outlook has improved, thanks to slowing inflation, recovering credit flows, and improved liquidity conditions, many low-income countries still face less favorable business conditions, while high-income economies face prolonged political uncertainty. Furthermore, we must bear in mind that two-thirds of the country risk upgrades we made last year are based on short-term indicators, showing that these improvements are cyclical and potentially reversible. Given this scenario, companies should be attentive to their growth strategies in the context of geopolitical tensions and the rising tide of protectionism. Supply chains are likely to become even more complex, making monitoring country risk even more important.”

What can stop growth? Although the 2024 outlook showed progress, Allianz Trade warns of challenges that could compromise the positive trajectory in the coming years. Among the main risks are:

• Geopolitical tensions: Intensification of social, political, and institutional conflicts.
• Increased protectionism: risk of trade wars and greater barriers to exports.
• Political polarization: Deepening of divisions in advanced and emerging markets.
• Social instability: Increased protests and civil conflicts motivated by inflation and fiscal adjustments.

According to Ana Boata, director of economic research at Allianz Trade, an escalation of trade disputes could trigger a domino effect on the global economy, slowing investment and putting pressure on inflation. For the expert, "a widespread trade war is a major concern: the resulting loss of economic activity and the return of inflationary pressures would likely undermine investor confidence, keeping them in a prolonged 'wait and see' mode. At the same time, the growing polarization, already evident in many countries, imposes significant economic costs while intensifying social divisions. The frequency and severity of civil unrest are also increasing, driven by factors such as inflation, fiscal adjustments, and lagging productivity growth. Faced with this scenario, policymakers need to overcome the growing confidence deficit and mitigate the risks of polarization."