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Brazil Credit Rating Cut to Junk by S&P Amid Budget Strain

BRAZIL President Dilma Rousseff

 

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.

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.

Panarmenian

 

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