UPDATE 2-Fitch warns of possible Brazil downgrade as economy falters

jueves 9 de abril de 2015 13:09 GYT

(Adds comment from Finance Ministry source, market reaction)

By Walter Brandimarte

RIO DE JANEIRO, April 9 (Reuters) - Fitch Ratings on Thursday warned it may cut Brazil's credit rating in the next couple of years if the economy deteriorates further despite President Dilma Rousseff's efforts to correct macroeconomic imbalances.

Fitch revised the outlook on Brazil's BBB credit rating to negative from stable, a widely-anticipated move that put it in line with competing ratings firm Moody's Investors Service. So far, only Standard & Poor's has downgraded the country to BBB-minus, the edge of speculative territory.

Investors largely shrugged off Fitch's warning, with the real gaining 0.5 percent on hopes Rousseff will find enough congressional support to pass recently announced austerity measures.

"Fitch hasn't done anything besides positioning itself in line with other ratings agencies," said Carlos Kawall, chief economist with J. Safra Bank in Sao Paulo. "That doesn't change the outlook that has been causing those negative (ratings) actions."

Fitch's decision did not cause a stir at the Finance Ministry, either.

"It is not surprising, but we don't think the timing is right," said a ministry official who requested anonymity. "Brazil's outlook has been improving with signs that reforms will be approved."

In an attempt to safeguard Brazil's coveted investment grade, Finance Minister Joaquim Levy has unveiled a series of spending cuts and tax hikes aimed at curbing fiscal deficits that had spiralled during Rousseff's first term in office.   Continuación...