login
Euromoney CountryRisk logo
  • Global Risk Table
  • Countries
  • Analysis
  • About Us
    • About ECR
    • Methodology
    • FAQS
    • Become an Expert
  • Contact Us

Junk status not on the cards for Brazil, say ECR experts

Jeremy Weltman Friday, November 08, 2013

Speculation concerning possible junk status for Brazil might be wide of the mark, according to data from Euromoney Country Risk.

Latin America’s biggest economy has attracted speculation it might be downgraded next year if its poor economic growth and fiscal decline continue.

As emerging market currency and asset markets have come under greater pressure in the second half of 2013 – amid lower growth and less accommodative US monetary policy – some commentators make Brazil odds-on to become the first of the Bric nations to lose its investment-grade rating.

While the economic outlook in Brazil is less favourable than it was 18 months ago, Euromoney’s Country Risk Survey indicates the country – ranked 39th globally and still included in ECR tier three – is still considered to be less risky than India and Russia, ranking 59th and 60th respectively. Under ECR’s methodology, any country included in ECR tier three is considered to be investment grade.

Brazil is the only Bric to have slipped in the rankings during the third quarter, enabling China (climbing to 37th) to become the safest of the four once again. However, Brazil’s CDS spreads (at 187 basis points on November 5) are tighter than those for the State Bank of India – an equivalent proxy, at 297 basis points – according to Markit, the financial information services company, and a careful inspection of risk indicators suggests Brazil still has many supporting features.

Note, from the chart below, it comes out on top for nine of its 11 economic and political risk indicators.

One negative indicator is the economic-GNP outlook, which is worse than India’s, but this reflects a stronger growth prediction for India next year (5.1% compared with 2.5% for Brazil, according to the IMF); where the current account is concerned, India’s deficit is expected to be larger.

The other is government finances, vis-à-vis Russia – backed by its oil and gas wealth – but not India.

Moreover, Brazil’s political risk indicators are highly favourable relative to Russia’s, and also stand out in comparison with India’s, especially where government stability is concerned.

Brazil might be downgraded, and it might become the first Bric to lose its investment grade, but Euromoney’s Country Risk Survey indicates such a move is not justified.

This article was originally published by ECR. To find out more, register for a free trial at Euromoney Country Risk.

Recent articles

  • ECR survey results Q3 2022: Political risk is heightened by conflict, inflation and tightening financial conditions

  • ECR survey results Q2 2022: Covid, war and stagflation risks perplex investors

  • ECR survey results Q4 2021: EMs on back-foot as the year ends

  • ECR survey results Q3 2021: CEE shines but Brazil, Nigeria and other EMs recoil from global investing roadblocks

Euromoney CountryRisk logo

The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our  Terms & Conditions ,  Privacy Policy and Cookies before using this site.


All material is subject to strictly enforced copyright laws. Euromoney Country Risk is part of the Delinian Group Delinian Limited 8 Bouverie Street London EC4Y 8AX Registered in England and Wales, Company number 00954730 Copyright © Delinian Limited and its affiliated companies 2023

  • Methodology
  • FAQs
  • Articles
  • Contact us
  • Modern Slavery Act Transparency Statement