After slashing Brazil's credit rating to junk status, removing the country's precious investment-level status, Standard & Poor (S&P) has clarified that the move was not made based on its anticipation of the resignation of President Dilma Rousseff.
On Thursday, Roberto Sifon-Arevalo of S&P's sovereign ratings team had stated that if Rousseff were eventually impeached, the agency would re-evaluate its rating based on the impact of this move on governance and policy-making, Xinhua reported.
According to the agency, S&P's risk analysis that led to the decision to lower Brazil's credit rating to BB+, or the first level of the "junk" category, does not consider the scenario of an early exit of Rousseff from power.
Explaining its decision, the agency stated that Brazil's ongoing corruption investigations were having a negative impact on short-term growth and "hindering the implementation of policies by the government."
The capacity to implement measures in key areas is an important way of getting S&P to re-evaluate the rating, for which Sifon-Arevalo made several suggestions.
"There is an urgent need for a coherent, consistent and proactive policy to be activated as soon as possible," he said.
Furthermore, the agency considered a return to growth as essential to bolstering other economic engines of growth.
For her part, Lisa Schineller, S&P's managing director of Sovereign Ratings, explained that, while the corruption investigations were having a negative economic impact, they showcased Brazil's institutional strength.
She added that S&P was taking on board the fact that the Brazilian government had been taking measures to improve the economy, albeit at a slower rate than expected.
Therefore, the ratings agency could well improve Brazil's credit rating if S&P sees credible and correct measures being taken, according to Schineller.
In the wake of S&P's decision, the Brazilian Central Bank announced Thursday that it would hold an auction to release 1.5 billion U.S. dollars into the market to avoid a further slide of the real against the American currency.
The Brazilian government has said it would take every measure needed to reverse this decision.
This resolve was likely to have been further strengthened after the US dollar saw a 3.14 percent rise against the real after the rating was announced.
