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S&P downgrades Brazil’s sovereign debt rating to BBB minus

Tuesday, March 25th 2014 - 08:51 UTC
Full article 8 comments
Bad news for Dilma Rousseff ahead of October's presidential election Bad news for Dilma Rousseff ahead of October's presidential election

Standard & Poor's cut Brazil's sovereign debt rating closer to speculative territory in a blow to President Dilma Rousseff administration. Brazil had its long-term debt rating downgraded to BBB minus, the agency's lowest investment-grade rating. S&P changed its outlook to stable from negative, meaning further downgrades are unlikely for now, which will come as a relief for both politicians in Brasilia and financial markets.The move was widely expected but the timing surprised some investors.

 As it came ahead of an October election in which Rousseff will seek a second term, the downgrade will expose her left-leaning government to further accusations that it has squandered the goodwill built during a long economic boom last decade.

Brazil has suffered from slow growth that averaged about 2 percent in recent years. Rousseff has tried to revive the economy with tax cuts and social spending but has been widely criticized for intervening too much and resorting to sometimes opaque accounting moves to meet budget targets.

“The downgrade reflects the combination of fiscal slippage, the prospect that fiscal execution will remain weak amid subdued growth in the coming years, a constrained ability to adjust policy ahead of the October presidential elections, and some weakening in Brazil's external accounts,” S&P said.

The agency said that fiscal credibility had been “systematically weakened” following cuts in the government's main budget target, and that loans by state-run banks had “undermined policy credibility and transparency.”

The Brazilian finance ministry rejected S&P's arguments and said the downgrade contradicted Brazil's solid economic fundamentals and healthy standing compared with other major economies.

“The Brazilian economy has low external vulnerability because it holds the fifth largest volume of international reserves among G20 nations,” it said in a statement.

Top Comments

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  • yankeeboy

    Higher costs, power outages, slum insurrection, recession. looks like a great place to live!
    BRICs had their generational opportunity to try to pull themselves out of the mire but not one of them was able to. It looks like every one of them has reverted back to what the 3rd world Sh*tholes that they always have been.

    Mar 25th, 2014 - 11:50 am 0
  • JoseAngeldeMonterrey

    This is a near-junk rate. Incredible when we think about all construction and public investment going on because of the world cup.

    Mar 25th, 2014 - 03:14 pm 0
  • ChrisR

    Now the gloss has been peeled away in so many areas Brazil is revealed for what it is: a pretender country to a civilised world.

    Dilma listens too much to The Liar Mantega and the economy suffers because of it.

    The way this is going they will be lucky to stay ahead of The Dark Country: it could happen so easily.

    All the suspect building work for the WC cannot hide the truth that football para todas just isn’t going to help.

    Mar 25th, 2014 - 05:10 pm 0
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