S&P raises Brazil’s debt rating outlook to positive

The positive outlook means that the agency may raise the country’s rating over the next two years. Currently, S&P assigns a BB- ​​rating to Brazil, three levels below investment grade, guaranteeing that the country is not at risk of defaulting on its public debt.

In a note, S&P reported that the improved outlook reflects a greater possibility that the country will grow more with stability in monetary and fiscal policies. Despite deficits still high, the agency stated that the continued growth of the Gross Domestic Product (GDP, sum of the riches produced in the country) and the new fiscal framework proposed by the government may make the public debt rise less than initially expected.

According to the communiqué, the improvement in the outlook represents a first step towards improving the rating of the Brazilian public debt. According to S&P, the rating (risk classification) could be raised in two years if the institutions implement a “pragmatic” economic policy, which manages to make room for more growth. In addition to the new framework, the agency mentioned the approval of additional reforms, such as the tax one.

The last time the S&P raised the note perspective in Brazil had been in 2019. With the covid-19 pandemic, the perspective became stable in 2020but the rating of the Brazilian debt has not changed.

Since January 2018, S&P Global has classified Brazil three levels below investment grade, the same rating given by Fitch, another of the main risk rating agencies. Moody’s rates the country two notches below investment grade.