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Weekly Report - 17 September 2015 (WR-15-37)

BRAZIL: After downgrade, government plans face opposition

Following the decision of the credit rating agency, Standard & Poor’s, to downgrade Brazil’s sovereign credit rating to junk status last week, the government has been scrabbling around for measures to tackle its budget deficit. Should a second credit rating agency downgrade Brazil’s status, it could cost the country up to US$20bn in foreign investment, according to JP Morgan. So far, Moody’s and Fitch have shown a willingness to hold fire, but unless the government can show it is capable of minimising the shortfall, a second downgrade seems likely by the end of this year. Once again, however, the weakened government has run into the usual problem: it lacks the congressional support to pass further tax hikes.

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