The Brazilian government is exploring additional measures to combat the aftermath of historic flooding in the state of Rio Grande do Sul, just days after unveiling a 52 billion reais ($10 billion) aid plan. In an effort to assess the full extent of the damage and financial needs, the country is in talks with the International Monetary Fund and the World Bank, according to Dario Durigan, executive secretary of the Finance Ministry.
The government is considering whether sovereign guarantees will be required for any facility or credit lines agreed upon with multilateral lenders. Meanwhile, Durigan emphasized the government’s commitment to fiscal responsibility and cautious scaling of the response to the crisis.
The devastating floods, the worst in the state’s history, have claimed over 150 lives, displaced half a million people, and disrupted power and transportation systems. The airport in Porto Alegre, the state capital, is expected to remain closed for several months.
Finance Minister Fernando Haddad’s economic team, of which Durigan is a senior member, acknowledges that it is still premature to estimate the full economic impact on the country’s gross domestic product. Despite prioritizing support for the state and the affected population, Durigan remains committed to maintaining the government’s fiscal goals.
During his meetings with investors in the US, Durigan declined to comment on recent turmoil at state-controlled oil producer Petroleo Brasileiro SA and the departure of Chief Executive Officer Jean Paul Prates.
Furthermore, Brazil is considering additional sales of sustainable debt later this year, following the issuance of $2 billion worth of such notes in November. Durigan acknowledged the strong interest from private investors and potential underwriters but noted that the combination of higher international borrowing costs and a strong dollar presents challenges.
The government recognizes the constraints imposed by elevated US interest rates and is moving cautiously in exploring these additional aid and financing options for the recovery of Rio Grande do Sul.
