By Walter Brandimarte
RIO DE JANEIRO, Feb 24 (Reuters) – Moody’s Investors Service
expects Brazil’s credit ratings to suffer in 2015 if the next
government does not make major policy changes to regain market
confidence and ensure a decline in the country’s debt burden.
Mauro Leos, Moody’s analyst for Brazil, told Reuters in an
interview in New York late on Friday that the country’s Baa2
rating, currently with a stable outlook, is based on “an
implicit assumption that something will have to change next
year.”
“The balance of negatives and positives that keeps the
rating outlook stable could shift, depending on what happens
next year,” Leos said.
Brazil last week pledged to deliver a primary fiscal surplus
of 1.9 percent of gross domestic product in 2014, but many
investors fear that President Dilma Rousseff will have a hard
time cutting expenditures during an election year in which she
will seek a second term.
That fiscal target raises hopes that the country’s debt
position will at least not deteriorate this year, Leos said,
adding that more needs to be done in 2015. Other ratings
agencies expressed similar concerns about Brazil’s commitment to
further fiscal tightening in 2015.
Leos said that a primary fiscal surplus target of around 3
percent of GDP as of 2015 “would be required to prevent some
problems with the debt-to-GDP ratio, that is already high.”
A slowing economy is another concern for Moody’s. If GDP
growth does not recover toward a level of 3 percent a year, it
will be very difficult for Brazil to produce the necessary
budget savings given how rigid government expenditures are,
Moody’s said.
(Reporting by Walter Brandimarte; Editing by Chizu Nomiyama)
