Government praises increase in Brazil’s credit rating at Moody’s

The Ministry of Finance released a note this Tuesday (1st) praising the increase in Brazil’s credit rating from Ba2 to Ba1, made by the risk rating agency Moody’s.

“The update puts Brazil one step closer to the much-desired investment grade. This movement comes a few months after Moody’s assigned a positive outlook to the country, in May 2024, which reflects an improving trend in Brazilian credit, which began in 2023”, says the department headed by minister Fernando Haddad.

In the note, the ministry also highlights that Moody’s highlighted “the robust performance of GDP growth and the progress made through economic and fiscal reforms as central factors for the review”.

For the ministry, the agency must have “commitment to fiscal targets and the debt/GDP stabilization trajectory, crucial aspects to maintain the positive assessment”.

Among the reforms mentioned, the Ministry highlighted tax as “an important pillar, with the potential to improve the business environment, improve resource allocation and boost long-term growth.” “In addition, the government’s energy transition agenda was seen as a relevant factor in attracting private investment and reducing vulnerability to climate shocks”, he highlights.

Regarding the fiscal aspect, the Ministry says that Moody’s projected a gradual improvement in the government’s primary results, in line with the goals for the next three years. “This is due to an increase in revenues and cuts in expenses, although the agency still sees debt and interest costs as challenges. However, Brazil benefits from significant liquid assets and the fact that it finances its debt mainly in local currency”, explains the ministry.

Finally, Haddad’s ministry reaffirmed “its commitment to fiscal balance, highlighting efforts to increase revenue and contain expenses.” According to the ministry, “the expectation is that the stabilization of the debt/GDP ratio will contribute to reducing interest rates and improving credit conditions, creating a more favorable environment for public and private investment.”

“The upgrade of the rating by Moody’s reflects the recognition of advances in public accounts and the solidity of Brazil’s economic fundamentals, pointing to a scenario of sustained growth and greater confidence on the part of investors”, concludes the ministry.