Fitch Downgrades Brazil to junk, with negative outlook

Jeffrey T. Lewis – The Wall Street Journal, 12/16/2015

Fitch Ratings cut Brazil’s sovereign credit rating for the second time this year, citing the country’s ballooning budget deficit, political turmoil and a deeper-than-expected recession, and leaving the country’s debt with junk status and dealing a fresh blow to Brazilian President Dilma Rousseff as she struggles to revive the economy and avoid impeachment.

The downgrade left Brazil’s rating at BB+, one notch into junk territory, with a negative outlook.

Fitch is the second of the big-three ratings companies, after Standard & Poor’s, to downgrade Brazil’s debt to junk, which could trigger a selloff of Brazilian assets and weaken the currency. It will also make it more expensive for the Brazilian government to borrow, at a time when Finance Minister Joaquim Levy is trying to cut the government budget deficit.

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