Moody’s upgrades Brazil’s sovereign credit rating and maintains a positive outlook, bringing the country even closer to achieving investment grade.

The credit rating agency Moody’s upgraded Brazil’s sovereign credit rating from Ba2 to Ba1, while maintaining a POSITIVE outlook. This upgrade comes just a few months after the agency assigned a positive outlook to the country’s rating in May 2024, reinforcing the broader trend of improving sovereign credit ratings for Brazil that began in 2023. With this upgrade, Brazil is now even closer to reaching investment grade according to Moody’s.

In their statement, Moody’s refers to a material improvement in the country’s credit profile, driven by robust GDP growth and a solid track record of economic and fiscal reforms. In this context, the agency underscores the importance of maintaining fiscal discipline and stabilizing the debt/GDP ratio, considering these factors as key to supporting the positive outlook for the new rating.

When discussing the impact of recent reforms on improving the country’s medium-term growth expectations, the agency highlighted the tax reform, which is expected to enhance the business environment and resource allocation, thereby boosting long-term growth potential. Additionally, the government’s energy transition agenda is noted as a factor that not only attracts private investments but also reduces the country’s vulnerability to climate shocks.

Regarding the fiscal theme, Moody’s expects a gradual improvement in the government’s primary results in line with fiscal targets for the next three years. This expectation is based on efforts to increase revenues and expense-cutting initiatives. According to the agency, although debt and interest expenses are considered high, Brazil has significant net assets, and most of the public debt is domestic, denominated in local currency.

In this regard, the Ministry of Finance reaffirms its commitment to continuously improving fiscal results through efforts to increase revenue and contain expenses. In addition to stabilizing the debt/GDP ratio, a stronger fiscal balance will contribute to lower interest rates and improved credit conditions, creating a favorable environment for the expansion of public and private investments.

Moody’s credit rating upgrade reflects the recognition of progress in public finances, a favorable growth outlook, and the strength of Brazil’s economic fundamentals.