S&P Global Ratings lowered long-term foreign and local currency sovereign credit ratings on Brazil to BB- from BB. The outlook on the ratings is stable.
"The weakening of our institutional assessment of Brazil reflects slower-than-expected progress and lower support by the country's political class to put in place meaningful legislation to correct structural fiscal slippage on a timely basis," S&P said in a report. "Recent political developments also foreshadow the risk of greater policy uncertainty after national elections later this year."
According to the credit risk rating agency, the stable outlook "reflects our view that there is a less than one-in-three likelihood that we could raise or lower the ratings on Brazil over the coming year."
S&P also said that Brazil's comparative external and monetary policy strengths help offset significant fiscal weakness, while the country's economy has growth prospects lower than peers and the "effectiveness of policymaking across branches of government has weakened."
The rating agency warned that "we could lower the ratings over the coming year should unforeseen weakness in Brazil's balance of payments arise that either impairs market access or generates a sharp rise in external debt."