MercoPress. South Atlantic News Agency
Fitch downgrades Brazilian bonds to junk; investors could dispose of 20bn in debt
Fitch downgraded Brazil to BB+ with a negative outlook less than 24 hours after Rousseff moved to loosen next year's budget targets. 
Brazil's currency and dollar-denominated bonds tumbled amid forced selling after the country's second downgrade to junk in three months Fitch Ratings downgraded Brazil government bonds to junk on Wednesday, citing rising concerns about an economic and political crisis that threatens to push President Dilma Rousseff from office and scuttle efforts to close a gaping fiscal deficit.
Fitch downgraded Brazil to BB+ with a negative outlook less than 24 hours after Rousseff moved to loosen next year's budget targets. That undercut her orthodox finance minister, who staked his reputation on an austerity agenda now stalled in Congress.
Brazil's currency and dollar-denominated bonds tumbled amid forced selling after the country's second downgrade to junk in three months, further clouding the outlook for an economy suffering from the sharpest downturn in a quarter-century.
Investors barred from owning junk bonds could dispose of about $20 billion in Brazilian sovereign and corporate debt after two ratings agencies have stripped Brazil of its prized investment grade, analysts at JPMorgan Securities estimated in October.
Fitch said a political crisis had restricted the government's ability to right the economy.
Rousseff's opponents have accused her of breaking budget rules and are trying to impeach her, while key allies are threatening to bolt her coalition amid a widening bribery scandal at state-run oil company Petrobras.
“The impeachment proceeding is a setback” Shelly Shetty, Fitch's head of Latin American sovereign ratings, said after the downgrade. “Impeachment delays implementation of fiscal measures.”
Top Comments
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Read all commentsDilma is holding Brazil back.
Dec 17th, 2015 - 08:53 am 0I laughed last year when they said it would only last a year and they'd be back on track.
Dec 17th, 2015 - 12:02 pm 0This is s snowball rolling downhill getting bigger and more dangerous.
PBR better start liquidating quicker.
I think its funny how a few years ago WB, which is full with Progs, crowed about Venezuela and Brazil “lifting people out of Poverty” calling it a miracle and everyone should jump on the bandwagon. Nary a peep from them now as this new prosperity is proving to be false and unsustainable.
They will drag the real middle class into poverty. with these terrible policies.
Just watch.
This was the best news of the year! Brazil is definitely no longer the country of speculation and becomes the country of production. We are working for the dismissal of Levy and Tombini. We want SELIC interest rates lower than 4%. Our goal is to keep the dollar above 3.80 reais. We also want a law which is being processed in Congress is approved prohibiting the transfer of any type of information to rating agencies that are not associated with the BRICS Bank.
Dec 17th, 2015 - 01:53 pm 0This will ensure that speculative money will not return to Brazil. And ensure that Real remains at levels that provides more investments in the productive sector oriented to export mainly to the giants BRICS.
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