S&P cuts Brazil sovereign credit rating to junk

Standard & Poor's cut Brazil's sovereign credit rating to junk on Sept.9, citing the struggle by President Dilma Rousseff's government to master growing debt and political turmoil.

"We are lowering the long-term foreign and local currency ratings on Brazil to 'BB+' and 'BBB-' respectively," the agency said in a statement.
 
The junk rating is a blow to Brazil's foundering economy because it could drive off investors just when Rousseff and her finance minister, Joaquim Levy, are battling to balance the books.
 
Analyst Andre Leite at TAG Investimento noted that Brazil now finds itself rated lower than Russia, which is under painful international sanctions over its support for separatists in neighboring Ukraine.
 
"If another rating agency also lowers Brazil, then very probably we're going to see institutional investors obliged to pull their money out," Leite said.
 
Last month Levy, who has tried to steer Brazil to health with austerity measures, presented the country's first ever deficit budget for 2016 and he is now under pressure to raise taxes despite heavy opposition in Congress.
 
The government also announced in August that the economy was officially in recession and that the contraction could extend through 2016, becoming the longest recession since 1931.
 
"The political challenges Brazil faces have continued to mount, weighing on the government's ability and willingness to submit a 2016 budget to Congress" consistent with economic targets, Standard & Poor's said.
 
"The negative outlook reflects what we believe is a greater than one-in-three likelihood of a further downgrade due to a further deterioration of Brazil's fiscal position," the agency said in its statement.
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