Haddad minimizes Moody’s criticism of Brazil’s fiscal solidity

The Minister of Finance, Fernando Haddad, minimized the criticism made by Moody’s about the Brazilian economy being in “weak fiscal soundness” It is “sensitive”. In publication in https://twitter.com/Haddad_Fernando/status/1785736203523801169 (formerly Twitter), did not mention the agency’s note and prioritized praise for the government of President Luiz Inácio Lula da Silva (PT) for the stability of the note and the change in the perspective of the scenario.

The Brazilian index indicated by Moody’s is Ba2, which indicates a greater risk for foreign investments. The degree has been maintained since 2016 by Brazil. However, the outlook for the economic situation has changed “stable” for “positive”, exactly the point celebrated by Haddad.

The minister stated that the change is part of a joint effort by the Three Powers. Without mentioning Congress, with whom he has had disagreements, he said that the interests [dos representantes do governo] rise above differences “surpassable”.

Shortly afterwards, President Lula shared Haddad’s publication and said that Brazil “He was respected again”.

“The Brazil we are building is once again respected in the world and has regained economic and environmental credibility. This is good for everyone”, https://twitter.com/LulaOficial/status/1785750073583788347.

The Minister of Institutional Relations, https://twitter.com/padilhando/status/1785723319511105601, also commented on Moody’s announcement. Did not cite the agency’s record on a fiscal scenario “weak” and congratulated Haddad and the leaders of the Chamber and Senate.

He also said that Brazil must give importance to the health of public accounts to have “positive progress” in the next evaluation.

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Understand Moody’s announcement

The economic risk rating agency classified Brazil in a scenario “positive” for foreign investments, despite highlighting the fiscal environment as “weak” It is “sensitive” due to the country’s high debt and little capacity to pay off debts.

The rating given by Moody’s was Ba2 – which indicates a greater credit risk. He described that the weight of Brazilian debt should increase in 2024-25, until the country enters a more stable scenario.

If economic stability is real in the coming years, the agency should raise the future rating, as indicated.

“The Ba2 rating reflects fiscal strength that is still relatively weak, given Brazil’s spending rigidity, high debt burden and weak debt repayment capacity, which remains sensitive to economic or financial shocks”he said.

In a note, the National Treasury said that a better fiscal balance will lead to a reduction in interest rates and an improvement in credit conditions.

“Conditions will be created for the expansion of public and private investments and the generation of jobs, increased income and greater economic efficiency”he said.