Thursday, February 18th 2016 - 06:57 UTC

S&P sends Brazil's credit rating deeper into junk territory; officials 'surprised'

Standard & Poor's downgraded Brazil's credit rating deeper into junk territory on Wednesday, citing its failure to curb its fiscal deficit, in a surprise blow to President Dilma Rousseff`s bid to haul the economy out of its worst recession in decades.

S&P cut Brazil's sovereign credit rating to BB from BB+ with a negative outlook, just five months after becoming the first agency to strip it of its investment grade

Standard & Poor's highlighted Rousseff's government's inability to plug the widening fiscal deficit amid a deepening political and economic crisis.

Brazil's benchmark Bovespa stock index and the Real gave back some of the day's gains immediately after the decision. In 2015 the Real lost over 30% of its value

 S&P cut Brazil's sovereign credit rating to BB from BB+ with a negative outlook, just five months after becoming the first agency to strip the country of its coveted investment grade. Fitch ratings followed suit in December.

Standard & Poor's highlighted the government's inability to plug the widening fiscal deficit amid a deepening political and economic crisis. Brazil's economy, the largest in Latin America, is on track for its worst recession since records began in 1901, after contracting around 4% last year.

“We now expect a more prolonged adjustment process with a slower correction in fiscal policy, as well as another year of steep economic contraction,” S&P said in a statement.

Brazil's budget deficit has mushroomed since Rousseff took office in 2011. The deficit equaled 10.3% of GDP in 2015, nearly five times its shortfall in the 12 months to mid-2011. By comparison, at the height of its debt crisis in 2009 Greece had a deficit of 15.2% of GDP.

The downgrade caught Brazilian officials by surprise. Once the rising star among major emerging economies, Brazil now shares the same rating of its much poorer neighbors.

“We were considering this possibility, but we didn't think it would come so quickly,” said a presidential aide, while another government official said the surprise move could prompt the administration to announce a series of fiscal measures as soon as Friday.

The government is working on legislation to reduce its fiscal goal for 2016 as revenues plummet. The government is also considering a budget freeze of around 24 billion reais ($6.02 billion), down sharply from the near 70 billion reais in 2015, the official told Reuters.

In an official statement, the finance ministry said it was confident the downgrade will be reversed as soon as measures to rebalance the public accounts and bolster growth start to take hold.

Brazil's benchmark Bovespa stock index and its currency gave back some of the day's gains immediately after the decision.

The downgrade could exert further downward pressure on the real currency and prompt investors to exit an economy that only four years ago was growing above 4%, and raise borrowing costs for the government and corporations. The real currency lost more than 30% of its value last year.

Barclays said it expects S&P to downgrade Brazil again by the end of the year as political turmoil is likely to continue. Moody's and Fitch could downgrade the country in the first half of the year, Barclays said in the research note.

25 comments Feed

Note: Comments do not reflect MercoPress’ opinions. They are the personal view of our users. We wish to keep this as open and unregulated as possible. However, rude or foul language, discriminative comments (based on ethnicity, religion, gender, nationality, sexual orientation or the sort), spamming or any other offensive or inappropriate behaviour will not be tolerated. Please report any inadequate posts to the editor. Comments must be in English. Thank you.

1 Skip (#) Feb 18th, 2016 - 08:46 am Report abuse
The surprise only highlights their level of incompetency.
2 Brasileiro (#) Feb 18th, 2016 - 08:51 am Report abuse
The Noam rating agencies have no use for not subjected to Western interests countries.

The Bank of BRICS and AIIB already ranked Brazil as investment grade. We will soon be signing several contracts for the financing of new infrastructure and the development of a defense industry complementary to Russia and China.

Always keeping the yuan as currency.

www.youtube.com/watch?v=Y7ZjAQARGoE&list=FLmXPTu1f8AdGlizWNiASx2A
3 Skip (#) Feb 18th, 2016 - 09:11 am Report abuse
Sign all the contracts you want with whomever you want.

Doesn't change the reality of Brazil's situation. A stinking deep recession that isn't getting any better. Wealth destroyed, unending deficits, debt growing towards 100% of GDP and no end in sight.

As for the AIIB, Australia has actually ratified the Articles unlike Brazil. We also have more shares in the Bank than Brazil. Haven't seen anything to say they think Brazil is “investment grade”. You can be sure we won't be voting for Brazilian investment at the rate you are destroying your economy.

As for the BRICS Bank..... what a waste of time. Hardly surprising they will invest in Brazil as they are a government vehicle and not much else. Your own government will invest in itself.

They can't even run themselves properly let alone a bank.

You keep the Yuan as your currency. My country will be keeping its own currency and not the Chinese even though it is us and not you that has a free trade agreement with China. And soon to have a free trade agreement with India.

The rest of the BRICS aren't important enough.
4 Brasileiro (#) Feb 18th, 2016 - 09:23 am Report abuse
Not only do they invest. Last year Brazil received $ 86 billion in foreign direct investment which makes Brazil the fourth largest recipient of productive investments in the world.

Investment funds want to speculate? Go to Australia, here in Brazil ... NOT.

www.youtube.com/watch?v=nfdei_8f3-I&index=9&list=FLmXPTu1f8AdGlizWNiASx2A
5 L0B0MAU (#) Feb 18th, 2016 - 09:51 am Report abuse
Hello, Brasileiro!
Thanx for the “Good News”!
So please cheer the millions of Brazilians who are:
- losing jobs
- losing their standards of living
- losing the quality of their lives
- spending too much but buying less
- can't afford to buy the basic necessities
- obtaining loans at absurdly high interest-rates
- closing companies
- going bankrupt
- unable to educate their children
- unable to spend for health-care
- finding it more & more difficult just to survive
- leaving Brazil while they can
The list is unending but I'm sure that you will be able to help the government in brainwashing the ignorant & retarded Brazilians.
6 Brasileiro (#) Feb 18th, 2016 - 10:16 am Report abuse
The Brazil opens 5000 companies more than closed in 2015. Therefore, you are misinformed.
BTW it is good that you think exactly the opposite of us Brazilians. Because your world no longer interests us most. The dollar is garbage. And your people has been brainwashed the large investment funds that only serve to concentrate income.
7 L0B0MAU (#) Feb 18th, 2016 - 10:39 am Report abuse
“Brazil opens 5'000 companies more than closed in 2'015”:
- FANTASTIC!
- However in 2'016; the unemployment, inflation & recession are spiralling out of control!
= Perhaps these 5'000 companies which you refer to, are either closed already or are operating without any manpower.
8 Brasileiro (#) Feb 18th, 2016 - 10:47 am Report abuse
Unemployment in Brazil is very low: 6.8%. You count on the fingers countries that have a lower unemployment rate than this.

Fantastic even is not need of the Western for nothing.

Poor Chile, after signing the Treaty of Slavery Pacific the Brazil will retaliate all imports coming from that country. With Peru Brazil will be more patient, considering that China asked that.

Only to avoid the famous triangulation.
9 Conqueror (#) Feb 18th, 2016 - 11:20 am Report abuse
@8. You must be a mutant. There are 74 in this list. www.theguardian.com/news/datablog/2015/jan/20/global-unemployment-forecast-to-hit-212m-country-by-country-breakdown
10 Brasileiro (#) Feb 18th, 2016 - 11:36 am Report abuse
pt.tradingeconomics.com/brazil/unemployment-rate

The link above shows the data of unemployment in Brazil, Mr. Wolverine.
11 Skip (#) Feb 18th, 2016 - 12:07 pm Report abuse
Aah Brasileiro

And yet Australia...
Isn't in recession.
Has lower unemployment.
A free trade agreement with China.

Thank God the Portuguese didn't colonise Australia.... we could be as poor as you.
12 Jack Bauer (#) Feb 18th, 2016 - 02:19 pm Report abuse
“The downgrade caught Brazilian officials by surprise.”.......

Only the brazzo officials...not me. In fact, the only surprise was that they didn't do this before.

@2 BR asshole (with shit for brains)
“The Bank of BRICS and AIIB already ranked Brazil as investment grade”....

And so what ? All BRICS countries with the exception of India, are in the shit. So no surprise that, all being in the same shitty situation, they would bond together.......and sink together...

@4 BR asshole
“ Last year Brazil received $ 86 billion in foreign direct investment which makes Brazil the fourth largest recipient of productive investments in the world.”

86 billion 'what' ?? DOLLARS !!? or Yuan ? if the latter, not worth a shit, besides, why , in your expert opinion, would Brazil want foreigners investing USD in the country ???

@6 BR asshole (cuzão...)
“The Brazil opens 5000 companies more than closed in 2015. Therefore, you are misinformed.”

Pure , unadulterated BS........it's a well known fact that nearly all these companies are small, individual firms, being opened by people who have lost their jobs....so, exchanging security for insecurity...I say this because more than 90% of all these companies will close their doors in under 2 years....and the bankrupt owners, after having spent 100% of their retirement fund (FGTS), will have nowhere to turn.

@8 BR asshole
“Unemployment in Brazil is very low: 6.8%.”.........BIG lie. PT statistic. You should count the 30 million adults, of working age, who are receiving handouts (Bolsa Família - a social programme that will be reduced in 2016, due to lack of money) which means that unemployment is nearer 20-25%......

Keep on fooling yourself, you misinformed moron.
13 VoiceOver (#) Feb 18th, 2016 - 02:38 pm Report abuse
The Brasilian economy is going from very bad to even worse, and Brasileidioto is happy.

He would have made a great captain on the Titanic.
14 Briton (#) Feb 18th, 2016 - 08:32 pm Report abuse
What Brazil need is macri.
15 Brasileiro (#) Feb 18th, 2016 - 08:52 pm Report abuse
Brazil is friend from Argentina. Macri is friend!

But Brazil do not need them.

www.youtube.com/watch?v=y85peXWXxAk&list=FLmXPTu1f8AdGlizWNiASx2A&index=48
16 Jack Bauer (#) Feb 18th, 2016 - 09:14 pm Report abuse
@15 BR asshole
Brazil may be friendly with Argentina, but Macri is no friend of Dilma's, Luladrão's or of any of the PT scum. And Brazil does not need you either.
17 Brasileiro (#) Feb 18th, 2016 - 09:23 pm Report abuse
Jack Bosta.....VTNC
18 L0B0MAU (#) Feb 18th, 2016 - 09:29 pm Report abuse
Hello, Brasileiro!

REF: “Unemployment in Brazil is very low: 6.8%”: Please do spread this “Good News” in Brazil. You will be as famous and popular in Brazil as D. R.!
19 Brasileiro (#) Feb 18th, 2016 - 09:34 pm Report abuse
Tu es Chilindio? Cabrone, respeta tu master!

www.youtube.com/watch?v=kmvHTem5mYU&index=69&list=FLmXPTu1f8AdGlizWNiASx2A
20 Skip (#) Feb 19th, 2016 - 06:39 am Report abuse
Brazil can't even project power within its own favelas.

It definitely doesn't project it outside its own borders.
21 L0B0MAU (#) Feb 19th, 2016 - 09:23 am Report abuse
Be ready for:
- R$ heading for US$ = 6
- Official Declaration of some form of an “Emergency”
- “Collor-Style” Theft of the savings
22 The Voice (#) Feb 19th, 2016 - 10:16 am Report abuse
There are lots of new window cleaning companies in Brazil, one man companies.

Nostril, shut up, everyone knows Brarshole is you. Its pathetic
23 Jack Bauer (#) Feb 19th, 2016 - 05:32 pm Report abuse
@17 Brasbosta
You are so stupid I feel sorry for you.
Depois de comer seu prato de merda, por que é que você não vtnc ? seu fiofó largo já deve estar acostumado.....
24 Brasileiro (#) Feb 19th, 2016 - 08:56 pm Report abuse
kkkkkkkk não aguentei. kkkkkkk saxão burro do cacete!
25 Jack Bauer (#) Feb 20th, 2016 - 01:00 pm Report abuse
@24 BR asshole
when you run out of arguments, you resort to “kkkkkkkk não aguentei. kkkkkkk saxão burro do cacete!”

Não aguentou o quê ? o pau do Luladrão no teu fiofó ?

Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!

Advertisement

Get Email News Reports!

Get our news right on your inbox.
Subscribe Now!

Advertisement