...Negative Rating Trends: Downgrades are expected to outpace upgrades for Brazilian corporates during 2015. This continues a trend that began in 2012, when downgrades for corporates with international ratings outpaced upgrades by a ratio of 1.4x, a ratio that climbed to 3.6x in 2014, the record high for the past decade. Ratings are still considered tight within the various rating categories. Currently, 20% of the 119 Brazilian corporates rated by Fitch Ratings have a Negative Outlook; only 4% have a Positive Outlook. Cash Flow Under Pressure: Fitch does not expect any tax-relief initiatives that could materially benefit corporates' cash flow from operations (CFFO) as seen in 2012 and 2013, as the Brazilian government is now oriented to tighter fiscal policies. Brazilian corporates are likely to face brutal conditions in 2015 due to a combination of weak demand, persistent high inflation, declining commodities prices, rising interest rates and foreign exchange volatility. Industry and consumer...
