SAO PAULO, June 14 (Reuters) – S&P Global Ratings on
Wednesday revised its outlook for Brazil to “positive” from
“stable,” saying that improved fiscal and monetary policy
outlooks could boost the South American country’s low growth
levels.
The decision by the ratings agency is a major boost for
leftist President Luiz Inacio Lula da Silva, who returned to
office in January amid fears he would lack fiscal discipline and
expand the role of the state.
News of the decision lifted Brazil’s real currency, which
rose more than 1% against the dollar in its fourth consecutive
positive session. The Bovespa stock index closed 2%
higher at its highest level since October.
The ratings agency said continued growth, combined with a
new fiscal framework, “could result in a smaller government debt
burden than expected, which could support monetary flexibility
and sustain the country’s net external position.”
Finance Minister Fernando Haddad welcomed the news, saying
Latin America’s largest economy is showing a great capacity to
show positive results.
“The dollar is falling, the GDP is growing, inflation is
under control, and Brazil’s rating is improving in the eyes of
the world,” Haddad said on Twitter.
The country’s proposed fiscal framework, yet to be approved
by the Senate, establishes a limit on real growth for public
spending, aiming to address public debt concerns. Senators are
still negotiating a final format for the new rules.
Treasury Secretary Rogerio Ceron expressed confidence that
the approval of new fiscal rules and tax reform will lead to an
improvement in the country’s rating by all agencies.
Along with the continuation of the measures planned by the
government’s economic team, the S&P decision will pave the way
for the recovery of the country’s investment grade by 2026,
Ceron told Reuters, adding that it would boost the government’s
agenda.
The ratings agency also affirmed its ‘BB-/B’ long and
short-term foreign and local currency sovereign credit ratings
on Brazil.
(Reporting by Peter Frontini in Sao Paulo and Marcela Ayres in
Brasilia; Editing by Anthony Esposito, Lisa Shumaker and Paul
Simao)
