On a decision made today (May 19), Fitch Ratings kept Brazil's status for foreign currency at BB, with a negative outlook. The country is two notches below the investment grade.
The negative outlook, the agency says, reflects the ongoing uncertainties regarding Brazil's economic recovery, the stabilization of the public debt—due to an unbalanced budget—and the advancement of reforms, particularly the pension reform.
The firm notes that recent political incidents linked to President Michel Temer sharpened the uncertainties regarding the progress of the reform, and may undermine the perspectives on the country's economic recovery.
The rating by foreign agencies represents the measure of confidence of international investors in the economy of a given country. The grades serve as reference for the interest in government bonds, which is how the government borrows money from investors.
In a note, the Finance Ministry points out that the agency mentions the instrumental role of the reforms under deliberation and the challenge posed by their approval. They are believed to help reverse the current fiscal scenario and to contribute for the improvement of the public debt.
“The assessment made by the agency stresses the importance of the initiatives aimed at recovering the Brazilian economy and the construction of the pillars for sustained growth. The Finance Minister reiterates its commitments to seeking the country's fiscal consolidation and the sustainability of the public debt,” the note adds.
Translated by Fabrício Ferreira