Fitch Downgrades Brazil Credit Rating

10/16/2015 - 09h28

Credit rating agency Fitch downgraded Brazil's sovereign credit rating. The country kept investment grade status, but it is only a step away from losing it.

The outlook is negative, what means the most likely scenario is a new downgrade in the future.

The political crisis that has been hindering the implementation of the fiscal adjustment and the deterioration of the economy were mentioned as the causes of the cut.

Fitch believes the recession experienced by the country will be deeper and longer than its earlier expectations. The agency forecasted the country's GDP will shrink 3% this year and 1% in 2016.

Fitch was the "most optimistic" of the three major agencies. Standard & Poor's stripped Brazil of its investment-grade credit rating in September. Moody's had placed the country in the lowest investment grade - just above junk status -in August.

Fitch's move puts Brazil in the same situation as Russia, also considered speculative grade by the other two agencies.

After the news, the government has reinforced the "urgency" to solve disputes about the 2015 and (mainly) 2016 budgets.

For that to happen, the government believes a "ceasefire" with the speaker of the lower house of Congress, Eduardo Cunha (PMDB-RJ), is essential to save his mandate and avoid the impeachment of President Rousseff.

Cunha said the government is responsible for the cut. "The government needs to do its part to stabilize the political process by having constant support," he said.
 
p(tagline). Translated by JULIANA CALDERARI

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