Fitch Ratings on Wednesday downgraded Brazil’s sovereign credit rating to speculative status, the second international credit agency to do so in two months. Standard and Poor’s downgraded Brazil from investment grade to speculative status in November. Fitch downgraded Brazil from triple-B-minus to double-B-plus, its highest speculative grade. Only Moody’s Investors Service now maintains Brazil at an investment grade level. However, Moody’s recently switched Brazil’s outlook from neutral to negative and could withdraw the country’s investment grade rating at any time. In announcing the downgrade, Fitch cited a number of now familiar factors, including Brazil’s persistent recession, high inflation, deteriorating fiscal accounts and nagging political uncertainties. The Brazilian Real weakened sharply on the news, trading Wednesday afternoon at R$3.95 against the U.S. dollar. The Real closed out last week at R$3.87 to the dollar. With two credit agencies now rating Brazil as speculative, a number of institutional investors will be obliged to withdraw from Brazilian investment positions, causing the country’s current account gap to widen.
Link to Fitch release.More Testimonials