Moody’s has downgraded Brazil’s government debt rating to ‘Baa3’ from ‘Baa2’, one notch away from sub-investment grade, adding to the country’s existing troubles.
However, it was widely expected that Moody’s would make such a move following Standard & Poor’s announcement that it had downgraded the outlook on its ‘BBB-‘ rating for Brazil to negative from positive at the end of July.
Moody’s decision to downgrade Brazil’s debt was based on three main contributing factors. Firstly, the country’s weaker-than-expected economic growth. Secondly, the volume of government mandatory expenditures is rising. Weaker-than-expected economic growth, falling tax revenues and higher levels of spending are a recipe for disaster. And thirdly, Moody’s made the decision to downgrade Brazil based on the lack of political consensus to push fiscal adjustments.
Combined,...
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