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15 mar 2017

Moody's changes outlook on Brazil

Moody's changes outlook on Brazil's Ba2 issuer rating to stable from negative

Moody's Investors Service has today changed the outlook on Brazil's rating to stable from negative and affirmed its issuer rating, senior unsecured at Ba2 and shelf ratings at (P) Ba2.

Moody's decision to change Brazil's outlook to stable was driven by the following factors:

1. Moody's -decision to change brazil's outlook driven by expectation that downside risks reflected in negative outlook are abating, macroeconomic conditions stabilizing.

2. Indications that the functioning of Brazil's policy framework is improving and the strength of its institutions recovering, supporting planned implementation of structural fiscal reforms

3. Risk of contingent liabilities from government-related entities, captured in the negative outlook, has been significantly reduced

Over the past six months, downside risks to the Ba2 rating have abated and macroeconomic conditions have stabilized in Brazil, with an incipient recovery in economic growth expected in 2017 and faster-than-anticipated fall in inflation. A positive reform momentum emerged last year, indicating improved functioning of institutions that would support implementation of fiscal reforms and passage of the social security reform this year. Contingent liability risks related to financial support to Petrobras have diminished, reducing downside risks, while the fiscal cost of debt relief provided to state governments remains contained. Overall, the government debt trajectory remains in line with our earlier expectations for 2017-19 and consistent with the Ba2 rating.

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