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BRICs (Brazil, Russia, India, and China) cannot seem to get much love lately. Today, it's Brazil's turn to say "show me the love".
Reuters reports S&P Cuts Brazil Credit Rating.
Standard & Poor's cut Brazil's sovereign debt rating closer to speculative territory on Monday in a blow to President Dilma Rousseff, whose efforts to stir the economy from a years-long slump have eroded the country's finances.Mike "Mish" Shedlock
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.
"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.