Moody’s rates Brazil at investment grade

Brazil, for years dogged by its boom-and-bust economy, has finally won a place on the top table in the eyes of all the leading ratings agencies as it has been upgraded to investment grade status by Moody’s.

The US ratings agency cited the resilience of the Brazilian economy to the financial crisis for the upgrade of its sovereign debt ratings one notch to Baa3, its lowest investment grade rating.

It is a sign of the success of Brazil’s policy-makers in turning its economy round as many other nations have faced downgrades this year, even among industrialised economies, such as Ireland and Greece.

Moody’s, which is the last of the three main ratings agencies to promote Brazil to investment grade, signalled it could raise the country’s ratings further by putting it on positive outlook.

It caps years of reforms in the country, designed to control inflation and government debt, and comes in the wake of a rebound in the economy, which had slumped into a short-lived recession.

Moody’s said the strong banking system, high-level of foreign currency reserves and quick recovery from recession shows Brazil is now ready to join the investment grade club.

This is important as many funds are only allowed to invest in investment grade assets as those in high-yield or junk, the category below, are considered too risky.

Mauro Leos, Moody’s regional credit officer for Latin America, said in a statement: “Moody’s believes the chances that Brazil will stay on a multi-year path of improved creditworthiness are reasonably high. For this reason, we have assigned a positive outlook to Brazil’s sovereign ratings.”