The ratings on the Federative Republic of Brazil are constrained by: A high public-sector debt burden compared with similarly rated credits. Reported gross general government debt, projected at 63% of GDP for 2001, excludes various "fiscal skeletons," or government obligations, worth slightly over 10% of GDP. Ongoing incorporation of these obligations is an important component of improved transparency in fiscal accounting. External financial vulnerability. Brazil's net of liquid assets external debt burden, projected to be 274% of current account inflows (CAI) in 2001, remains one of the highest among rated sovereigns. However, net public-sector debt, at 92% of CAI, is much lower. Structural economic weaknesses, including a distortionary tax regime, fiscal rigidities, and social and income inequality that undermine Brazil's
