Brazil’s 70% of GDP Debt Puts It Far from Investment Grade

Brazil is still far from the much coveted Investment Grade in spite of financial market speculations according to the risk rating agency Fitch Ratings, which estimates that the BBB qualification will have to wait "two to three" years.

"Since 2003, Brazil's external indicators have improved substantially. Even so Brazil's advance to Investment Grade rating is hampered by a mediocre growth rate and the high indebtedness of the Brazilian government," said Fitch in a report titled "Can Latinamerica BB sovereign bonds reach Grade Investment?"

Fitch argues that Brazil needs to considerable increase its fiscal ratios in the coming years if it wishes to approach the levels of countries with Investment Grade. Brazil's global debt stands at 70% of GDP, which is double the average of countries rated BBB.

"With a fiscal deficit of 3% of GDP and growth in the range of 3 to 4%, even the government's indebtedness is not heading for a significant reduction," adds the report.

The risk agency also questions Brazil's low investment level (21% of GDP) and the below average efficiency.

To overcome these shortcomings, according to Fitch, Brazil must address economic reforms which face another obstacle since the majority of them need constitutional modifications demanding a majority of 60% in both Houses of Congress. And reelected president Lula da Silva does not have a sufficient majority in any of the two.

Last but not least, statistics don't favor Brazil reaching Investment Grade in 2007.

Between 2000 and 2006, Fitch raised the ratings of ten countries to Investment Grade and therefore the chances for a BB+ country of reaching the much coveted goal in just one year is only of 18.3%, while the chances that a BB rating makes it is only of 5%. However in a three year period chances for a BB rating increase to 23%.

Brazilian analysts speculate that if the country reaches Grade Investment, sovereign bonds will mean a boom in investment.

Mercopress

Tags:

  • Show Comments (2)

  • jony

    Ch.c once an idiot…always an idiot!!
    Only in your imaginary world Ch.c …hehe not even you pay much attention to what you write!!! Laughable…but indefensible

  • ch.c.

    Yeahhhh !!!!!
    Were the details not what Lula told to his citizens…..on a regular basis…for the last 3 years of how good his policies were ?
    Why did Brazilians swallowed Lula lies ???? Laugh…laugh….

    Were the informations not the ones I have been trompetting all along…for “only” the last 2 years ?

    Noooo I did not rant…..I simply said the truth !

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Raising Interest Rates Is Not A Whim, Says Brazil’s Finance Minister

Brazil’s Finance Minister, Antonio Palocci, declared that rising interest rates is not “capricious” and ...

Venezuela’s WSF Will Be a Showcase of Brazil’s Social Projects

The Brazilian government and Brazilian civil society will share 300 square meters in Caracas, ...

Por aí

The citizens’ voice In San Francisco on his way to Japan, Brazilian President Fernando ...

Brazil TAM to Fly Non-Stop from Rio to New York and Miami

Starting September 19, Brazilian airline TAM will fly direct from Rio de Janeiro to ...

A Water Project That Would Benefit 15 Million in Brazil

One of the major steps planned by the Brazilian government for 2005 still exists ...

Brazil Thinks Ways of Using Alternative Sources for Power

The Brazilian National Forum of State Energy Secretaries is meeting through today in Recife, ...

Extensive Ore Beds Go Unexplored in Brazil

The state of Amazonas possesses Brazil’s largest known reserves of sylvite, kaolin, and niobium, ...

Brazilian Author Recalls the Pain of Writing City of God

Fernando Meirelles' Oscar-nominated City of God was one of the most controversial Brazilian movies ...

Brazil Concerned with Venezuela’s Restlessness But Not Too Much

Brazilian Foreign Minister, Celso Amorim, speaking in Davos, Switzerland, at the World Economic Forum, ...