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Fitch cuts Brazil's credit rating to the brink of junk

Staff writer |
Fitch Ratings cut Brazil's credit rating to the brink of junk, warning the country could soon lose its coveted investment grade rating.

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The reason is government finances deterioration amid a prolonged recession and persistent political uncertainty.

The new ratin, likely to increase borrowing costs for the government and Brazilian companies, piles pressure on President Dilma Rousseff to push crucial savings measures through Congress.

Yet additional austerity could sink Latin America's largest economy deeper into recession, further weakening a government already crippled by political gridlock and mounting opposition from legislators.

Fitch cut Brazil's rating to BBB-minus from BBB. It left a negative outlook on the new rating, suggesting it could become the second major rating agency to downgrade Brazil to junk within the next year or so.

A second move into junk territory would trigger further losses for Brazil's economy, because it could force investors to sell some of their assets in the country.

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