São Paulo – The US dollar rallied again this Thursday (10th), after a drop on the previous trading day. The American currency closed at R$ 3.85 for sale, up 1.34%, and the main São Paulo Stock Exchange index (Ibovespa) dropped 0.33% to 46,503 points. The reason for the dollar hike and the index’s reduction was the downgrading of Brazil’s credit rating, announced last Wednesday night (9th) by Standard & Poor’s, one of the three leading rating agencies alongside Moody’s and Fitch. The latter two maintained Brazil’s investment-grade status.
The dollar peaked at R$ 3.9173 early in the day, but lost steam after the Central Bank held an auction to sell US$ 1.5 billion. The Bovespa stock exchange, on the other hand, remained bearish throughout the day.
Standard & Poor’s downgraded Brazil’s rating from “BBB-“ to “BB+” after the government submitted the 2016 Draft Budget with a deficit forecast to Congress. When trading ended this Thursday, Standard & Poor’s also downgraded Petrobras’ rating – the state-owned oil company also lost its investment grade status as its rating went from “BBB-“ to “BB.” Petrobras was not alone: road industry companies Arteris, Ecorodovias and CCR, and energy industry companies Neonergia, Eletrobras and Comgas all had their risk ratings revised down.
This Thursday afternoon, the Brazilian minister of Finance, Joaquim Levy, said the government will strive for a primary surplus of 0.7% of Gross Domestic Product (GDP) in 2016. The primary surplus consists of government savings intended to pay interest on the national debt. Levy claimed the target will be pursued through spending cuts and tax raises. He also said Congress is discussing measures designed to improve the economic environment and draw investors in.
*Translated by Gabriel Pomerancblum
