| RIO DE JANEIRO, July 10
RIO DE JANEIRO, July 10 Fitch Ratings on
Thursday reaffirmed Brazil's "BBB" credit rating with a stable
outlook, saying it expects the next government to control
spending in order to avoid additional fiscal deterioration that
could trigger a downgrade.
The action concludes Fitch's annual review of Brazil's
rating, as promised by analyst Shelly Shetty in March. Some
analysts feared that, given the recent deterioration in the
country's economic fundamentals, Fitch could slap a negative
outlook on the rating at the end of that process.
Competing firm Standard & Poor's in March cut Brazil's
rating to "BBB-minus," just one notch above junk level,
interrupting a series of upgrades that catapulted Brazil into
investment grade in 2008.
With a stable outlook, Fitch is giving plenty of room for
the next president, who will be elected in October, to implement
the policy adjustments needed to restore Brazil's fiscal
responsibility and investor confidence.
Among the most pressing issues, Fitch cited "concerns over
lagging administrative price adjustments, reduced fiscal
credibility and the lack of a comprehensive reform agenda."
"While the election cycle is likely to delay these
adjustments, Fitch believes that some progress is likely after
the elections," the firm said in a statement.
Brazil's finances have deteriorated greatly under Rousseff,
who granted billions of dollars in tax benefits to key
industries in a failed attempt to jump-start an economy that has
been stuck in a rut since 2011.
The agency noted that, according to opinion polls, chances
are that President Dilma Rousseff will face a second round of
elections on Oct. 26.
"Irrespective of the outcome, Fitch expects some policy
tightening next year, although the pace and degree of the
adjustment and reform momentum could depend on the ultimate
winner and the size of the governing coalition," Fitch said.
(Reporting by Walter Brandimarte; Editing by Chizu Nomiyama)