Moody’s adds to pressure on Rousseff
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September 9, 2014
Brazil’s President Dilma Rousseff was dealt a fresh blow to her bid for re-election in next month’s election when Moody’s downgraded the outlook on its rating for Brazil’s government bonds to negative from stable.
The agency blamed slow economic growth for its decision which comes as Ms Rousseff is locked in an increasingly tight presidential race with polls showing her lagging behind her nearest rival, the charismatic environmentalist Marina Silva.
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“While other Latin American countries have also recorded declining growth rates, Brazil’s economic slowdown has been more pronounced and prolonged,” Moody’s said in a statement.
The Workers’ party-led government of Ms Rousseff has failed to wean Brazil’s economy off a dependency on consumption and consumer credit since she came to power in 2011, economists say. Investors, meanwhile, have criticised her for interventionist policies and price controls.
With economists projecting the economy will expand this year at less than half a per cent, her four-year term will have presided over the slowest growth since the presidency of Fernando Collor in the early 1990s.
The weakening economy has left her vulnerable to a surge in support for Ms Silva, who has come to the fore after Eduardo Campos, her presidential running mate died last month in a plane crash.
Polls show her winning in a run-off due a fortnight after the October 5 first round, although Ms Rousseff has regained some ground this week
Ms Rousseff’s reputation as a competent technocrat has also come under fire following the re-emergence of a scandal this week surrounding state-owned oil company Petrobras, which she headed during the government of her predecessor and mentor Luiz Inácio Lula da Silva.
A former executive, accused of accepting kickbacks in return for contracts, is reported to have given state investigators details of payments allegedly made to scores of politicians by private sector companies in return for contracts with Petrobras.
The Moody’s decision follows Standard & Poor’s decision to downgrade the country’s credit rating to one notch above junk in March.
Moody’s said the decision was motivated not only by Brazil’s falling growth rate but by a deterioration in sentiment that has lowered the rate of investment in the country and by a deteriorating fiscal position. “The next administration will face depressed economic conditions,” Moody’s said.
It said on the positive side for Brazil, it had high foreign exchange reserves, limited government foreign debt and a solid banking system.
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