S&P says it may wait for Brazil elections to decide on rating

Walter Brandimarte
Wednesday, 6 Nov 2013 | 6:59 PM ET

RIO DE JANEIRO, Nov 6 (Reuters) - Standard & Poor's said on Wednesday it could wait until Brazil's presidential elections late in 2014 to decide whether to cut the credit rating of Latin America's largest economy.

Allaying fears that Brazil could lose its BBB rating early next year, S&P's analyst Lisa Schineller said the firm may want to "see through the elections" to resolve the negative credit outlook it assigned to Brazil in July.

"If things are looking not great, but holding on, it could be that we want to see through what signs will be coming from an incoming government," she said in a phone interview. "Of course we could act (before) if things get really worse."

Brazil is rated at the second-lowest investment-grade level by the three largest credit rating agencies, which include Fitch Ratings and Moody's Investors Service, but only S&P has a negative outlook on the country.

Fears of a possible sovereign downgrade have been on the rise in the country since the government posted an unexpected primary deficit of 9.05 billion reais in September, the largest in nearly five years.

Worried about the deterioration of Brazil's fiscal performance, investors have been punishing the Brazilian real harder than other emerging market currencies as they speculated a credit downgrade could come sooner rather than later.

Schineller said that, while the latest fiscal numbers "aren't positive," S&P usually takes 18 to 24 months to make a ratings decision after revising its outlook.

"It's not an imminent decision, if we saw it was coming imminently, we would put it on credit watch," she said.

S&P welcomed the latest government pledges to avoid accounting maneuvers to meet its fiscal targets, but said that is not enough.

"Those words are important, but we also want to see execution," Schineller said.

(Reporting by Walter Brandimarte)