Fitch Ratings: Latin American Fiscal Recoveries Are Beating Expectations

• Figures reported by Latin American sovereigns show stronger-than-expected recoveries in public finances. In 2021, deficits in many sovereigns narrowed close to pre-pandemic levels. 
• Strong tax collections were the main driver behind the better-than-expected fiscal outturns, buoyed by solid rebounds in real GDP, and grew well in excess of these variables almost everywhere. Higher commodity prices were a fiscal boon for the region’s oil and metals producers. 
• Spending remains well above pre-crisis levels in most countries, due to ongoing pandemic-related expenditure, and inertial growth in permanent spending in the past two years. The strong revenue rebound offset this higher spending in most sovereigns, bringing down deficits significantly, except in Chile and Colombia where this spending has been particularly large and even grew in 2021. 
• Brazil, however, was an exception, withdrawal of generous pandemic benefits and containment of recurrent expenditures brought primary spending back to pre-crisis levels in real terms.

 (Source: Fitch Solutions)