S&P Downgrades Brazil's Credit Rating Straight Down to Junk Territory
Brazil's investment-grade credit falls beyond correction and into junk territory as Standard & Poor's downgraded the country's debt Wednesday.
According to a report from The Guardian, Standard & Poor's said that Brazil lost its investment-grade status as it is projected with a negative outlook. This downgrade is unfortunate as the nation enters a recession.
S&P expects Brazil to experience even worse financial status in 2016. This predicament only makes it more difficult for the Brazilian government to borrow money from international credit markets and most of the investors' money will simply be taken out of the nation.
According to S&P, President Dilma Rouseff faces mounting political challenges, focused on the government's ability to bolster its financial situation as she promised. Reuters reported that Rouseff's struggle to win back investor's confidence is one of the major reasons for the nation's investment grade going down the drain.
The ever increasing political strife in Brazil has led the country to increasing government deficit. The Brazilian real fell almost 3 percent to 3.9 per US dollar, which is a 13-year low. The central bank moves to help support the real by planning to sell some $1.5 billion through Thursday's repurchase agreements.
According to BBC's South American business correspondent Daniel Gallas, most analysts expected that Brazil would lose its hard earned investment grade, as possible future downgrades loom. But it was not expected to happen this soon. After being the first to junk the nation's investment status, everyone is watching the next moves from Moody's and Fitch.
As economic turmoil and political strife continue to batter the country, President Rouseff's austerity program that would manage inflation has been bombarded by attacks from both opposition and her administration.
This news hits hard the ordinary Brazilians who have been suffering from constantly increasing unemployment and commodity prices.
Planning Minister Nelson Barbosa said that if the country's economy returned growth, Brazil would regain its investment grade. He said the government is currently working on new proposals to tackle the budget deficits.