MercoPress. South Atlantic News Agency

Fitch lifts Brazil’s credit rating to investment-grade; further ‘improvement’ needed

The economy is growing at the fastest rate since 1994

Brazil’s credit rating outlook was boosted to positive from stable by Fitch Ratings, which cited the country’s “growth dynamics” and “prudent” policies. Fitch rates Brazil BBB-, the lowest investment-grade rating and in line with rankings from Standard & Poor’s and Moody’s Investors Service.

Fitch last boosted the country’s rating in May 2008, taking it up one level from BB+.

Latin America’s largest economy may expand 7.13% this year, the fastest pace since 1994, according to a central bank survey, after rising domestic consumption helped pull the country out of its deepest recession in a decade in 2009. Policy makers are paring economic stimulus and have boosted Brazil’s benchmark interest rate to 10.25% from a record low of 8.75% in March to contain inflation.

“The outlook revision reflects Brazil’s better-than- expected resilience and economic performance in the face of the global recession, which together with its relatively prudent economic policies should allow the country’s per capita income and fiscal solvency ratios to improve,” Fitch said in a statement.

“I think it’s great, but in terms of how that’s going to impact credit spreads it won’t have an enormous impact because the BBB’s all trade within a few basis points of one another,” said Siobhan Morden, a strategist at RBS Securities Inc. “When you look at the high grade Latin America pack, they all trade pretty much flat within the investment category.”

Brazil needs to further “improve” its fiscal stance amid rising inflation and “deterioration” in the current account deficit, according to the statement.

Brazil’s gross government debt is more than 60% of its economy, “well-above” the 10-year median of 35% of GDP for BBB-rated countries, Fitch said.

Fitch lifted Brazil’s rating to investment grade two years ago, partly as a rally in its commodity exports helped boost its foreign reserves to a record 253 billion from 38 billion US dollars when President Lula da Silva took office in 2003.