Brazil

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile --Institutional rigidities could result in only gradual policy implementation over the next two years. --The incoming government will be constrained by a weak fiscal and debt profile. --We expect the incoming government to sustain a fiscal anchor. --Brazil?s small current account deficits will be fully funded by foreign direct investment inflows. --Economic growth will be moderate and below emerging markets peers. --Restrictive monetary policy should help to soften inflation over the next 24 months. This framework will likely continue to limit changes in key economic policies but also result in slow progress on addressing fiscal and economic rigidities that have led to poor

...Our ratings on Brazil (##-/Stable/B) reflect a complex institutional framework that anchors its macroeconomic fundamentals. This framework will likely continue to limit changes in key economic policies but also result in slow progress on addressing fiscal and economic rigidities that have led to poor GDP growth over the past 10 years. The ratings are supported by Brazil's strong external position, a flexible exchange rate, and inflation-targeting monetary policy conducted by an autonomous central bank. Moreover, deep domestic capital and debt markets mitigate the sovereign's funding risk and allow the government to maintain a favorable composition of debt, mostly denominated in local currency....

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