Brazil has lost its investment-grade credit rating following a downgrade by Standard & Poor’s to “junk” status, according to BBC News.
The U.S. rating agency said mounting political turmoil and the difficulties faced by President Dilma Rousseff‘s government in tackling growing debt was behind the decision.
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Brazil was awarded an investment-grade rating by S&P in April 2008, when the country’s economy was on the rise. However, sliding commodity prices and austerity have created a recession.
Rousseff’s left-wing government had imposed austerity measures in a bid to avoid such a downgrade. S&P downgraded Brazil – Latin America’s largest economy – sooner than had been expected.
The move – a major setback for Finance Minister Joaquim Levy’s attempts to shore up public finances – is likely to rock the Brazilian stock market on Thursday, September 10. S&P cut Brazil’s rating from BBB-minus to BB-plus, which denotes substantial credit risk.
The outlook on the new rating remains negative, which means further downgrades could soon follow.
