SAO PAULO (Reuters) - Standard & Poor's Investor Services downgraded Brazil's sovereign credit rating on Monday because of concerns about the government's fiscal discipline and economic policy credibility.
The following are analysts' comments:
JANKIEL SANTOS, CHIEF ECONOMIST, ESPIRITO SANTO INVESTMENT BANK
"The downgrade with a stable outlook signals that S&P is not thinking of another move. What they're saying is, 'Do your homework to avoid dropping another notch and losing your investment-grade rating.' That is the warning.
"There could be a market reaction, but I think most of it has already happened. It's already reflected in prices."
ALBERTO RAMOS, HEAD OF LATAM RESEARCH, GOLDMAN SACHS
"It's not a big surprise for the market and reflects a gradual erosion in macroeconomic fundamentals in recent years, which warrants keeping Brazil at investment grade but not necessarily at two notches above investment grade.
It's bad news for the market. There was a possibility that S&P would wait until after the elections. I think the approaching World Cup and election campaign sped up the decision a bit. But the fact that the outlook was maintained at neutral could help the market digest the bad news.
"What is important is how the government will react to this loss of credibility and turn it into an opportunity to adopt more orthodox and conventional policies to deal with the pretty visible macroeconomic imbalances."
ANDRE PERFEITO, CHIEF ECONOMIST, GRADUAL INVESTIMENTOS
"What S&P must have observed is that the mid-term consistency of the Brazilian economy suggests some caution, especially with regards to fiscal variables and external accounts. Today we had some very concerning data on the balance of payments."
"The good news is that at least it's behind us. That clears the horizon for Brazil because six months to a year from now we won't have this kind of problem before us."
OCTAVIO DE BARROS, CHIEF ECONOMIST, BRADESCO
"This was a mistake. Considering indicators of international solvency, Brazil already had a lower rating than comparable countries. The market had reached a truce with emerging markets, so it is difficult to know the consequences of this measure."
TONY VOLPON, HEAD OF EM AMERICAS RESEARCH, NOMURA
"This was not entirely unexpected, given S&P's more critical stance on Brazil compared to other agencies. Some people thought it wouldn't happen for a few months. It could have market impact because some people were convinced by press reports fed by government sources that the announcement of a 1.9 percent primary budget deficit target would calm the ratings agencies."
(Reporting by Brazil Newsroom; Editing by Andrew Hay and Steve Orlofsky)
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