BRASILIA, Jan 11 (Reuters) - Ratings agency Standard & Poor’s cut Brazil’s credit rating on Thursday as doubts grew about the result of a presidential election in October and a push to trim its costly pension system, seen as vital to closing a huge fiscal deficit.
S&P lowered its long-term rating for Brazil sovereign debt to BB- from BB previously, with a stable outlook, citing less timely and effective policymaking. S&P also said there was a risk of greater policy uncertainty after this year’s elections.
The decision underscored concerns that a business-friendly reform agenda proposed by the unpopular President Michel Temer may stall this year as a looming presidential race shortens the legislative calendar.
Brazilian Finance Minister Henrique Meirelles had met with ratings agencies to try and stave off a downgrade after the government delayed to February a vote on pension reform that had initially been expected last year.
The move by S&P brings its long-term sovereign rating for Brazil three notches below investment grade. Brazil is rated Ba2 by Moody’s Investors Service and BB by Fitch Ratings — both two notches into “junk” territory.
The S&P downgrade “is a negative development but it was expected, particularly after pension reform was delayed. It’s not breaking news for markets,” said Goldman Sachs economist Alberto Ramos in by telephone.
A spokesman for Brazil’s central bank declined to comment. The finance ministry did not immediately comment.
“This was already on the horizon as a possibility, given the process around the pension vote,” said Wellington Moreira Franco, secretary-general for President Michel Temer’s office. “I think it’s a warning of the economic and social consequences of not approving pension reform.” (Reporting by Jake Spring and Lisandra Paraguassu; Additional reporting by Bruno Federowski in Sao Paulo and Kanika Sikka in Bengaluru; Editing by Brad Haynes and Sandra Maler)