19 Feb 2015
Brazil on the cusp of a BB+ rating – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team comments on the current position of the Brazilian economy, and adds that with high downside risks, the country is right at the cusp of a BB+ rating.
Key Quotes
“Just as everything seemed to go wrong for Brazil in 2014, we think the stars need to be aligned for Brazil in 2015 if Levy’s (and Rousseff’s) lofty goals are to be attained. Until those stars align, we believe Brazilian assets will continue to underperform within EM.”
“Investors remain very negative on Brazil right now, and rightly so.”
“However, positioning seems very one-sided, and so BRL and the Bovespa could see periodic short-covering rallies on positive headlines.”
“Yet the fundamental backdrop will not turn around quickly, giving investors a long window this year to decide on whether or not Levy and Rousseff have done enough to turn the ship around.”
“Downgrade risk remains high, as our model shows Brazil right at the cusp of a BB+ rating. If the fiscal numbers don’t improve soon, then the agency honeymoon for Levy will end.”
Key Quotes
“Just as everything seemed to go wrong for Brazil in 2014, we think the stars need to be aligned for Brazil in 2015 if Levy’s (and Rousseff’s) lofty goals are to be attained. Until those stars align, we believe Brazilian assets will continue to underperform within EM.”
“Investors remain very negative on Brazil right now, and rightly so.”
“However, positioning seems very one-sided, and so BRL and the Bovespa could see periodic short-covering rallies on positive headlines.”
“Yet the fundamental backdrop will not turn around quickly, giving investors a long window this year to decide on whether or not Levy and Rousseff have done enough to turn the ship around.”
“Downgrade risk remains high, as our model shows Brazil right at the cusp of a BB+ rating. If the fiscal numbers don’t improve soon, then the agency honeymoon for Levy will end.”