Bloomberg News

Brazil’s Credit Grade Raised One Level to BBB by S&P

November 18, 2011

(Adds Finance Ministry statement in fifth paragraph.)

Nov. 17 (Bloomberg) -- Brazil’s credit rating was raised one level by Standard & Poor’s, matching a move by Moody’s Investors Service earlier this year, as the country’s fiscal and monetary policies boost its ability to sustain growth.

S&P raised Brazil’s foreign-currency rating to BBB, the second-lowest investment grade, from BBB-. The outlook is stable. Brazil was upgraded to the equivalent Baa2 by Moody’s in June and to BBB by Fitch Ratings in April.

“We expect the government to pursue cautious fiscal and monetary policies that, combined with the country’s growing economic resilience, should moderate the impact of potential external shocks and sustain long-term growth prospects,” S&P said in a statement accompanying its decision.

Latin America’s largest economy is forecast to expand 3.16 percent this year, according to a Nov. 11 central bank survey of about 100 economists. Last year, the economy grew 7.5 percent, the fastest pace in more than two decades.

Brazil’s credit rating upgrade follows the adoption of prudent macroeconomic policies that paved the way for a “more flexible” monetary policy, the Finance Ministry said in an e- mailed statement today.

The extra yield investors demand to own Brazilian government dollar bonds instead of U.S. Treasuries climbed six basis points to 232 at 7:13 p.m. in Sao Paulo. Brazil’s real weakened 0.5 percent to 1.7795 per U.S. dollar. The country’s Bovespa stock index lost 2.7 percent to 56,988.90.

“This is not an immediate market moving event, and has long been priced in,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York. “An additional upgrade is going to be much more dependent on more structurally oriented fiscal adjustments, continued improvements to lower government debt ratios, and further efforts to reduce the economy’s vulnerability to external risk.”

--Editors: Glenn J. Kalinoski, Marie-France Han

To contact the reporter on this story: Boris Korby in New York at bkorby1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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