LatinNews Daily - 27 July 2023

In brief: Fitch upgrades Brazil’s credit rating

* The international credit ratings agency Fitch has upgraded Brazil’s Long-Term Foreign Currency Issuer Default Rating (IDR) from BB- to BB, citing factors such as “progress on important reforms to address economic and fiscal challenges” and resilient economic growth, with Fitch projecting annual GDP growth of 2.3% in 2023. The reform initiatives that Fitch highlighted included bills for a new fiscal framework and consumption tax reform. Both have been approved by the lower house of congress and are due to face votes in the senate. The ratings agency also said it expected that the left-leaning government led by President Luiz Inácio Lula da Silva would “adopt a pragmatic rather than interventionist approach”, adding that “his agenda still includes initiatives to boost private investment”. Fitch praised Brazil’s central bank (BCB) for maintaining a “prudent and proactive monetary policy during the recent inflation shock” and expected the BCB to begin lowering the benchmark interest rate – currently maintained at 13.75% – by August. Fitch also stated it expected Brazil to achieve a record trade surplus in 2023, supported by “strong agricultural output and lower import costs”, which it said could reduce Brazil’s current account deficit from 3.0% of GDP in 2022 to 1.8% by the end of 2023.

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