Brazil’s Credit Rating Downgraded Again

As if Brazil’s economy wasn’t already deep in the weeds, S&P just cut the country’s junk credit rating further a notch, from BB+ to BB. S&P said in a statement:”The political and economic challenges Brazil faces remain considerable, and we now expect a more prolonged adjustment process — a slower correction in fiscal policy as well as another year of steep economic contraction.” Rising inflation and further drops in price of iron ore, oil and other commodities are additional challenges.

In the statement, S&P added: “The negative outlook reflects that we believe there is a greater than one-in-three likelihood of a further downgrade…the risk of potential key policy reversals given Brazil’s fluid political dynamics and inconsistent policy initiatives, or as a result of greater economic turmoil than we currently expect.”

S&P had already stripped Brazil of its investment grade rating last September. Fitch also cut Brazil’s credit rating to junk in December. Moody’s still maintain an investment grade for Brazil, albeit its lowest, Baa3.

Source: Agence France Presse – 17 February 2016

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Emerging Markets Insights

a blog by Frontier Strategy Group

longandvariable

A blog on macroeconomics and public policy by Tony Yates.

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