|S&P cuts Brazil rating to lowest investment grade
Standard & Poor's cut Brazil's credit rating Monday by one notch, citing the government's unclear policy signals as it faces a weaker fiscal situation and slower growth.
S&P put Brazil's rating at BBB-, the lowest level for investment grade debt, and called the outlook stable.
S&P said the rating cut reflects “slippage'' in the government's fiscal balance and the prospects that slow growth over the coming years will leave the government less able to strengthen the balance.
It also cited weakening external accounts and “a constrained ability to adjust policy ahead of the October presidential elections.''
Both cyclical and structural factors are behind the growth outlook, S&P said, pointing to low investment, only 18 percent of GDP last year.
“Combined, these factors underscore the government's diminished room for maneuver in the face of external shocks,'' it said.
At the same time, it said, net external debt is rising but remains ''manageable.''
“Brazil's general government debt burden is high, but its composition remains solid... These factors underpin the low-investment-grade ratings.''
Brazil's finance ministry insisted the downgrade was “inconsistent with the country's economic conditions.''
The change “does not reflect Brazil's solid performance and fundamentals,'' the ministry's statement stressed.—AFP