Paulo Sambo and Felipe Pacheco – Bloomberg, 02/23/16
Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade, as President Dilma Rousseff struggles to shore up fiscal accounts amid deepening political turmoil.
The country’s benchmark stock gauge declined the most in two weeks and the currency weakened after the rating was reduced two steps to Ba2. The outlook is negative, meaning more downgrades may be coming, Moody’s said in a statement Wednesday.
Brazil’s credit metrics have deteriorated “materially” in the past few months and will worsen over the next three years, according to the ratings company, which also cited the negative impact of political gridlock on the government’s efforts to close a budget deficit and undertake structural reforms. The cut — Brazil’s third in as many months from major ratings companies — adds pressure on Rousseff to win lawmakers’ support for measures to raise taxes and reduce spending as she fights off efforts to impeach her.