By Lise Alves, Senior Contributing Reporter
SÃO PAULO, BRAZIL – Almost two years after Standard & Poor’s Ratings Services lowered its long-term foreign currency sovereign credit rating for Brazil to ‘BB’, S&P cuts its ratings once again, this time to ‘BB-‘, noting the country has made slower-than-expected progress to correct its fiscal situation.
“While the government has advanced many microeconomic reforms, it has been unsuccessful thus far in garnering broad congressional support to strengthen the fiscal trajectory in order to facilitate adherence to Brazil’s constitutional spending cap,” said the international credit rating agency in a press release on Thursday, January 10th.
The entity stated that although the Temer administration has pushed for an ambitious macroeconomic and microeconomic agenda to render conditions for stronger growth and fiscal performance in the coming years, it has not been enough.
Explaining that the current political turbulence and lack of support by the country’s political class to approve much needed structural reforms, such as the pension reform have dampened expectations of a timely economic comeback for South America’s largest economy.
According to S&P the agency could lower the ratings again over the coming year should unforeseen weakness in Brazil’s balance of payments arise that either impairs market access or generates a sharp rise in external debt.
At the end of December, Brazil’s Finance Minister Henrique Meirelles held a teleconference with the three major risk rating agencies, where he asked S&P, Fitch and Moody’s to wait for the February pension reform vote before making any decision on the Brazilian credit rating.
In a statement released on Thursday evening, the Ministry said that the government remains committed to fiscal adjustment measures and pension reform.
“The government reinforces its commitment to approve measures such as pension reform, taxation of exclusive funds, payroll reimbursement, postponement of public servants’ readjustment, and other initiatives that contribute to guarantee the sustainable growth of the Brazilian economy and long term fiscal balance.”