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Goal! Brazil scores higher credit rating

Dan Grech May 1, 2008

Goal! Brazil scores higher credit rating

Dan Grech May 1, 2008


KAI RYSSDAL: Let me take this opportunity to introduce what might be the brightest spot in a shaky global economy. Earlier this year Brazil went from being one of the world’s worst debtors to having a positive balance due. It’s kept inflation under control. And this week, Standard & Poor’s gave it a long-sought-after investment-grade credit rating. From the Americas Desk at WLRN, Marketplace’s Dan Grech reports.

DAN GRECH: In Brazil, the new rating got the kind of attention usually reserved for the national soccer team.

The Eurasia Group’s Christopher Garman:

CHRISTOPHER GARMAN: The president highlighted this being a magical moment. It received a lot of play in Brazil’s nightly news. It was headline news in most Brazilian newspapers.

Brazil’s stock market hit a record high. Bond yields dipped to a record low. But why all the hullabaloo over a credit rating? Riordan Roett is with Johns Hopkins University. He says many mutual funds and pension funds are barred from investing in junk-status bonds. The transition to investment-grade will translate to a flood of cash.

RIORDAN ROETT: Hundreds of millions to billions of dollars over the next three to six months, as portfolio managers realign their portfolios, making space for more exposure to Brazil.

Analyst Lisa Schineller is with Standard & Poor’s, the rating agency that upgraded Brazil. She says Brazil’s turnaround spanned both conservative and leftist administrations.

LISA SCHINELLER: The key thing that Brazil has is a sound policy framework that has withstood political transition.

She says Brazil still faces many fiscal challenges, including a high level of internal government debt.

SCHINELLER: There are many more rating levels between BBB-minus and AAA. And I think the incentive is to keep moving up the rating scale.

She says a high credit rating creates a virtuous cycle. The more money that flows into Brazil, the greater the motivation to keep the country on a sound fiscal path.

I’m Dan Grech for Marketplace.

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