Fitch unlikely to raise Brazil’s credit rating anytime soon, executive says By Reuters

By Luciana Magalhaes and Fabricio de Castro

SAO PAULO (Reuters) – Fitch is unlikely to upgrade Brazil’s credit rating in the near term despite better-than-expected economic growth because of doubts the country will be able to significantly improve public finances, an executive said in its sovereign ratings. said the group.

Fitch currently rates Brazil’s credit at BB, two notches below investment grade, with a stable outlook.

“To raise Brazil’s credit rating, we should have more confidence in the government’s ability to produce primary surpluses,” Todd Martinez, senior director and co-head of Americas sovereigns, said on Thursday.

Moody’s (NYSE: ) this week raised Brazil’s credit rating to just one notch below investment grade status, a vote of confidence for Latin America’s largest economy, which has lost its low-risk rating for nearly a decade ago.

However, Fitch maintains a more conservative stance than Moody’s, which raised the country’s long-term issuer and senior unsecured bond ratings to Ba1 from Ba2, with a positive outlook.

Martinez said economic activity in Brazil continued to surprise on the upside, with economists expecting gross domestic product to grow by about 3 percent in 2024.

“But public finances remain a weak point, with influences on confidence, exchange rates and therefore growth,” he said.

Martinez, however, praised President Luiz Inacio Lula da Silva’s administration’s efforts to improve the fiscal situation, with changes to its tax rules and a more recent agreement to withdraw payroll exemptions.

But despite these moves, Fitch expects the federal primary deficit to widen to 1.0 percent of GDP in 2025 from 0.6 percent this year, before falling to 0.8 percent in 2026.

Based on the agency’s current expectations for growth and interest rates, this would raise the debt-to-GDP ratio from 77.8 percent this year to 83.9 percent by 2026.

Lula and his economic team are aiming for Brazil to regain the investment-grade status it lost in 2015.

During a visit to New York in late September, he met with representatives of the three major rating agencies to discuss Brazil’s credit score.

Like Fitch, S&P rates Brazil at BB with a stable outlook.