Moody’s improves Brazil’s credit rating outlook

Moody’s revised the outlook for Brazil’s credit rating upwards on Wednesday (May 1). The country’s current rating stands at Ba2, indicating elevated risk for foreign investments. While maintaining the rating, Moody’s shifted the outlook from “stable” to “positive,” signaling that it may raise the rating in the future.

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Brazil’s National Treasury noted in a statement that this decision marks Moody’s first move since 2018 when it shifted the outlook from negative to stable. This move “reinforces the improvement in the trajectory of the credit rating seen since 2023,” coinciding with rating upgrades from Standard & Poor’s and Fitch. These three institutions are regarded as the most respected risk agencies in the market.

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• S&P raises Petrobras’s credit rating.

“If the credit rating undergoes a change, Brazil will be one step closer to reclaiming its investment grade status, a crucial milestone for the country’s economic stability indicators,” the Treasury explained.

Finance Minister Fernando Haddad emphasized on social media that Moody’s revision acknowledges the shift in Brazil’s economic trajectory. “This has to do with the collaborative efforts of all three branches of government, prioritizing national interests over divisive issues. Despite the momentary deterioration of the global economy, Brazil is moving forward and regaining economic, social, and environmental credibility. We have a lot to do,” he added.

Risks

Investment grade signifies that countries are considered unlikely to default on their public debt. Below this designation lies speculative grade, where the risk of default on public debt increases as the grade declines.

According to the National Treasury, Moody’s statement underscores the enhancement in the country’s growth outlook, attributed to consecutive structural reforms and institutional safeguards. These measures help “reduce uncertainties regarding future public policy directions.” Notably, Moody’s emphasizes the significance of ongoing tax reforms and fiscal consolidation efforts aimed at balancing public accounts.

“The Ministry of Finance reiterates the nation’s commitment to maintaining a sustainable trajectory for public accounts, combining efforts to improve collection and to contain the dynamics of expenditure,” stated the National Treasury in the note.