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Weekly Report - 22 October 2015 (WR-15-42)
BRAZIL: Another downgrade, another spike in inflation
The international rating agency Fitch downgraded Brazil’s sovereign credit rating from BBB to BBB- with a negative outlook on 15 October, one notch above junk. With the decision already priced in by many analysts, the stock market and the Real barely registered the change. Standard & Poor’s has already stripped Brazil of its hard-earned investment grade: if either Moody’s or Fitch follow suit, the country faces a severe risk of capital flight as many international funds will be under a legal obligation to ditch Brazilian investments. In early October, Moody’s indicated that it did not plan an imminent downgrade of Brazil. But the government is worried by the fact all of Brazil’s economic indicators are at the same level of other countries rated as junk by Moody’s.
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