Rating-cut angst lurks as Brazil stocks, real decline on budget

Denyse Godoy, Paula Sambo and Filipe Pacheco – Bloomberg Business, 7/22/215

Traders now have one more reason to expect a downgrade of Brazil’s credit rating.

Speculation that President Dilma Rousseff would cut the primary budget surplus goal, which excludes interest payments, spurred the biggest slide in the world for the real and sank the Ibovespa. After the close of trading, a government report confirmed that the administration is proposing a reduction of its target for this year.

The move is seen hurting Brazil’s credibility and worsening the outlook for an economy set for the worst recession in 25 years.
“That could certainly jeopardize the nation’s credit rating,” Jason Vieira, the chief economist at Infinity Asset Management, said by phone from Sao Paulo. “It would be terrible news for the economy and for investors alike.”

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