Crumbling BRIC
Moody’s Downgrades Brazil

With economic stagnation, the high-profile Petrobras scandal, and the ever-increasingly unpopular President Dilma Rousseff all plaguing Brazil, it’s no secret that the county’s problems have been worsening. But if further proof of the country’s troubles were necessary, Moody’s has given it earlier this week. The WSJ reports:

Moody’s lowered Brazil’s government bond rating to Baa3 from Baa2, and changed its outlook to stable from negative. The change still leaves the country’s ratings out of line with other countries in a similar debt situation, but Brazil’s large, diverse economy and “low susceptibility to event risk” help justify the investment grade level, Moody’s said. […]

Despite the downgrade, Moody’s move to a stable outlook could be considered positive, suggesting no more changes in the short term.

“It was good that Moody’s didn’t cut by two notches, and has a stable outlook. It amounts to saying that, despite the fiscal deterioration, Brazil can still keep its investment grade,” said Jankiel Santos, chief economist at BES Investimentos do Brasil in São Paulo.

Moody’s surely has its reasons for calling Brazil’s outlook stable, but the immediate future doesn’t look good for this country of great promise but middling fulfillment.

Large protests are planned for this weekend, and organizers are hoping to match the turnout from the two demonstrations that shook Brazil in the spring. Moreover, while Rousseff herself appears to have been cleared from direct involvement in the ever-expanding Petrobras scandal, a probe into governmental accounting irregularities could still trigger impeachment proceedings. The only silver lining for the Rousseff government is that the numbers for impeachment are just not there yet in congress. But these things can change on a dime.

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