S&P Maintains Brazil’s Junk Status and Negative Outlook

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – International ratings agency Standard & Poor’s (S&P) announced on Friday it was maintaining Brazil’s ratings two levels below investment grade and reaffirmed the negative outlook for the country.

Government officials, however, downplayed the negative outlook stating that the ratings companies would revise their outlooks once Brazil’s Congress passes the much needed economic reforms.

“The negative outlook reflects the risk that the government’s strategy to stabilize the economy and its fiscal position could be undermined by fluid political dynamics following three years of recession and by potential fallout from corruption investigations,” said the note released by the international entity.

According to S&P forecasts the Brazilian economy is expected to continue to post low growth over the next several years. The entity also forecasts the general government deficit to average over 7 percent during the 2017-2019 period, and net general government debt to rise toward 67 percent of country’s GDP by 2019.

Brazil’s Finance Minister, Henrique Meirelles, downplayed the negative outlook stating that the approval of structural reforms by the Brazilian Congress will change the assessment by risk agencies.

“Maintenance is part of a normal process for a sovereign rating at this stage of the adjustment of the Brazilian economy. With the approval of the pension reform, labor, the microeconomic agenda and the recovery of the economy in 2017, this framework will change,” said the minister said in a statement sent to the media on Friday night.

In September of 2015 Standard & Poor’s downgraded the country’s long-term foreign and local currency sovereign ratings to ‘BB+’ and ‘BBB-‘, respectively, taking away its investment grade.

Five months later, in February of 2016 the company further lowered the country’s ratings giving it a negative outlook.