Brazil Cut To Junk By S&P, ETF Falls 5% Post-Mkt
It’s not as if the writing wasn’t on the wall, and don’t say we didn’t warn you.
Brazil, whose economy officially slid into recession in Q2 – a quarter during which Brazilians suffered through the worst inflation-growth outcome (i.e. stagflation) in over a decade – and whose efforts to plug a yawning budget gap are complicated by political infighting and a growing public outcry against embattled President Dilma Rousseff, has been cut to junk by S&P.
- BRAZIL CUT TO JUNK BY S&P; OUTLOOK NEGATIVE
Unsurprisingly, the iShares MSCI Brazil ETF is trading sharply lower AH on the announcement:
S&P’s move comes as the country’s finance minister fights for his political life and as deficits on both the current and fiscal accounts paint a bleak picture, especially in the face of persistently low commodity prices, China’s move to devalue the yuan, and the impossible dilemma facing the central bank which, like its “LA-5” counterparts, can’t hike to combat a plunging currency for fear of exacerbating FX pass through inflation and can’t cut to boost the economy for fear of jeopardizing the 2016 4.5% inflation target.
Expect this to get far, far worse before it gets better. Here’s the headline dump:
- S&P SEES BRAZIL REAL GDP CONTRACTION OF ABOUT 2.5% THIS YEAR
- S&P SEES BRAZIL REAL GDP CONTRACTION OF 0.5% IN ’16
- S&P SEES BRAZIL REAL GDP MODEST GROWTH IN 2017
- BRAZIL GOVT DEFICIT TO RISE TO AVG 8% GDP IN ’15, ’16, S&P SAYS
- BRAZIL WON’T HAVE PRIMARY FISCAL SURPLUS IN ’15, ’16: S&P
Here’s a look at the country’s twin deficits:
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