A consistent macroeconomic framework, including inflation targeting and a floating exchange-rate regime; Track record of policy continuity through political transitions; and Government debt less vulnerable to exchange- and interest-rate fluctuations. Large net general government debt and interest burdens; Budgetary inflexibility amid high current spending; Structural impediments that limit investment and growth; and Moderate, though improving, external vulnerabilities. The ratings on Brazil reflect a consistent macroeconomic framework that includes a floating exchange-rate regime and inflation-targeting framework. The political transition of 2002-2003 to the first Partido dos Trabhaladores (PT) government highlights progress in maintaining the continuity of a stable macroeconomic policy across party lines in Brazil. Inflation has trended down since 2002, and year-end inflation of 3.1% in 2006 was below the
