Brazil Can Avoid Cut by Changing Fiscal Policy, S&P’s Nunes Says

Brazil can avoid a credit-rating cut from Standard & Poor’s by creating a fiscal policy that would control debt levels and draw private investment, according to Regina Nunes, the ratings company’s local chief.

Brazil’s BBB rating, the second-lowest investment grade, was given a negative outlook by S&P in June after gross debt rose to about 60 percent of gross domestic product.

Nunes, speaking at an event today in Florianopolis, Brazil, said economic growth will slow if the government can’t attract private investors to help pay for 250 billion reais ($110 billion) of rail, port and highway projects. Auctions for the infrastructure concessions start this month.

“Brazil has high inflation, low growth and little space for more expansionist fiscal policy without creating a debt problem,” Nunes said. “The government has recognized that it needs to stimulate private investment, but its attempts to do so have had no effect.”

Brazil’s rating from S&P matches Russia’s classification and is one level higher than India’s BBB-.

Gross domestic product expanded 3.3 percent in the second quarter from the period a year earlier, faster than economists had forecast. The economy expanded 0.9 percent in 2012.

Brazil’s annual inflation slowed to 6.09 percent in August, from 6.27 percent the month before. The central bank’s target is 2.5 percent to 6.5 percent.

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