Standard & Poor’s cut Brazil’s prized investment grade credit rating to junk on Wednesday and warned that it could lower it again in the coming months, in a major blow to President Dilma Rousseff’s government.
S&P attributed the move, which surprised analysts who had not expected such a downgrade until at least next year, to government backpedalling on its budget deficit targets as well as what it described as divisions in Ms Rousseff’s cabinet over fiscal policy.
“The political challenges Brazil faces have continued to mount, weighing on the government’s ability and willingness to submit a 2016 budget to Congress consistent with the significant policy correction signalled during the first part of President Dilma Rousseff's second term,” S&P said.