Brazil is the most vulnerable Latin American country if China’s credit bubble

Brazil is the most vulnerable Latin American country if China’s credit bubble were to burst, economists Aryam Vazquez and Marcos Casarin argued, because of the potential impact on exports of soy and iron ore and the likely plunge in commodities prices overall.

Economists currently expect Brazil's gross domestic product to grow 1.68 percent this year, and 2 percent in 2015, according to a weekly survey by the central bank.

Thanks to strong demand for its soy and iron ore from China, plus smart fiscal management and social welfare policies under Rousseff's predecessors, Brazil has managed to pull some 35 million people out of poverty since the mid-1990s. It also became a top market for foreign automakers, retailers and telecom companies.

But economists say that, generally speaking, Brazil sold too many cars during the boom while not building enough roads.

it channeled too much of the windfall toward consumption and not enough on investment.

tax cuts worth approximately 1.5 percent of GDP, while also keeping fiscal spending robust to stimulate the economy

The budget deficit is expected to hit nearly 4 percent of GDP in 2014, a percentage point above the past decade's average

That's not a huge budget gap by global standards. But investors hold Brazil to a tighter standard than most countries because of its history of runaway spending that resulted in hyperinflation in the 1980s and early 1990s


and the growing tax burden posed by Brazil's generous pension system.