Fitch maintains Brazil's credit rating with stable outlook

On Thursday (Jun. 27), the rating agency Fitch maintained Brazil's credit rating at BB, two notches below investment grade. The agency also retained a stable outlook, indicating that the country's assessment is unlikely to change in the coming months.

The last time Fitch upgraded Brazil's rating was in July of last year, when it was raised from BB- to BB. In December, the agency maintained the country's rating and outlook.

Among the positive factors for maintaining the rating, the agency cites the “diversification of the Brazilian economy, high per capita income, strong external finances, resilience to shocks, and a low share of debt in foreign currency.”

Although there was no change, Fitch noted that Brazil's rating is constrained by the economy's weak potential growth, the rigidity of the government's budget, and the high and increasing public debt. The agency emphasized the need for continued reforms in mandatory spending to reduce the public deficit, even after the approval of the new fiscal framework.

"The uncertain outlook for reducing large budget deficits, despite the implementation of the new fiscal framework, remains a significant source of macroeconomic vulnerability, with adverse repercussions for market confidence and monetary policy," said Fitch.

Fitch is one of the three major international agencies that assess Brazil's public debt. In December of last year, S&P Global upgraded Brazil's rating from three notches below investment grade to two, matching Fitch's rating. Moody's has rated the country two levels below investment grade since February 2016.