September 9, 2014

Brazil’s Credit Rating Cut to Negative by Moody’s

Brazilian currency Moody’s Investors Service has cut Brazil’s credit rating to Negative due to slow economic growth and unlikely improvement in the short term, is also warning that it may further cut Brazil’s credit rating as the country’s economy slows. Whoever wins this October’s presidential election in Brazil will face pressure to change the country’s economic policy.

With fiscal policy a hot campaign topic, current Brazilian president Dilma Rousseff has not responded to Moody’s warnings and has indicated that she won’t radically change policy if re-elected. She is facing a strong challenge from presidential candidate Marina Silva, who is looking to cut government spending if elected. Marina Silva would also become Brazil’s first black President if elected.

Aecio Neves, third in the Brazilian presidential polls has said that Moody’s statement is a reminder that Brazil’s social and economic progress is “at risk” due to fiscal indiscipline.

Under Rousseff term, Brazil’s growth has slowed to less than 2 percent per year, added to that a recession in 2014 and increases in government spending leading to an increase in Brazil’s debt burden.

Ibovespa, Brazil’s stock index, closed with losses of close to 1 percent after the Moody’s warning.

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Brazil's Credit Rating Cut to Negative by Moody's
Brazil's Credit Rating Cut to Negative by Moody's Investors Service
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