5/03/2008

Making the grade

Brazil gets recognition for improved economic management

Investment-grade status, which was awarded to Brazil?s foreign-currency-denominated debt on April 30th by Standard & Poor?s, one of the main US credit rating agencies, is an acknowledgment of the important progress achieved in macroeconomic management and of a substantial improvement in external solvency ratios. Indeed, with reserves close to US$200bn, Brazil has become a net external creditor. Nevertheless, weaknesses persist, as the government has confirmed its intention to keep increasing public spending as part of its state-led development policies.

The quest for investment grade was so long and fraught with difficulties that financial markets were taken somewhat by surprise when Standard & Poor?s (S&P) raised Brazil?s long-term foreign-currency credit rating from BB+ to BBB- on the eve of the May 1st Labour Day holiday. Even though some investors thought the upgrade had been long overdue, few expected it to materialise before the end of the year due to current global uncertainty. The Latin American giant is now on par with India, according to S&P?s ratings, but still two notches below the ratings given to Russia and Mexico, and far below that of China. ...



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[Source: The Economist: News analysis

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