Moody’s downgrades Brazil to edge of junk territory

Jeffrey T. Lewis and Rogerio Jelmayer – The Wall Street Journal, 8/11/2015

Moody’s Investors Service downgraded its credit rating for Brazil to one notch above junk status on Tuesday, citing weak economic growth and rising government spending, dealing another blow to embattled President Dilma Rousseff’s political standing.

Moody’s lowered Brazil’s government bond rating to Baa3 from Baa2, and changed its outlook to stable from negative. The change still leaves the country’s ratings out of line with other countries in a similar debt situation, but Brazil’s large, diverse economy and “low susceptibility to event risk” help justify the investment grade level, Moody’s said.

Brazil’s government last month slashed a key fiscal target as it struggles to boost tax revenue and get spending under control. It now expects to have a primary budget surplus, which is a measure of its ability to save and cut debt, equal to 0.15% of gross domestic product, compared with the previous target of 1.1% of GDP.

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