G&F downgrades Brazil’s debt to ‘junk bond

26 Aug

The Good Finance’s credit rating agency has lowered the Brazilian sovereign debt rating from ‘BBB-‘ to ‘BB +’, which is equivalent to a speculative grade, popularly known as ‘junk bond’. Brazil’s rating outlook is negative, which leaves the door open for further downgrades in the medium term.

Degrades Brazil’s debt to ‘junk bond’

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G&F thus becomes the first of the three large agencies that degrades Brazil’s debt to ‘junk bond’, after having lowered the perspective of the Brazilian note on July 28.

The agency explains its decision by the increasing risks of execution in the corrective policies in progress derived from the political dynamics in the Congress associated with the contagion effect of the corruption investigations of the state oil company Petrobras.

Budget proposal incorporates a new revision 

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In this regard, G&F points out that the 2016 budget proposal incorporates a new revision of the Government’s fiscal objectives, with a primary deficit target of 0.3% of GDP, compared to the previous 0.7%, reflecting “internal disagreements over the composition and magnitude of the necessary measures ”.

Likewise, the risk rating agency considers that the economic crisis will aggravate the execution risks. Specifically, G&F believes that the contraction of Brazilian GDP will be “deeper and longer” and has revised downwards its forecasts to -2.5% this year and -0.5% in 2016, before registering a slight growth in 2017

On the other hand, G&F points out that the negative outlook assigned to Brazil’s rating reflects a “higher than one in three” probability of a new rating downgrade.

“We anticipate that a reduction could be derived in the next year if there is a greater deterioration of Brazil’s fiscal position or if key policies are reversed due to the political situation,” the agency adds.

Curious how things change in a few years. Brazil goes from star to starry and there are indicators that do not fail. When a room in a three-star hotel in Sao Paolo was worth more than a room in a luxury hotel, it was a sign that something was very overheated in the Rio de Janeiro country.

20% of its income

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For certain attention to companies such as Banco San Priya that generated 19% of its profit in Brazil, Good Lender 30% of its GFIC, Bapre 17% of its profit or Porsigi about 20% of its income.

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