Brazil Seen Next in Line for Investment Grade

Brazil is first in line for promotion to investment grade, followed by Colombia, Peru and Panama, according to analysts. Bear Stearns MD Carl Ross and Shamaila Khan, MD at major US investor TIAA-CREF, both picked that sequence at a Fitch conference Tuesday. Panama and Peru are the only double B names Fitch has on positive outlook, according to Shelly Shetty, a senior director at the agency. But she conceded that both Brazil and Colombia could jump to triple B on a stable outlook. However, an unfavorable domestic debt profile, weaker growth prospects compared to high grade sovereigns and slow improvement in public debt dynamics is hurting Brazil’s chances of reaching investment grade, says Shetty. The country’s prospects would be enhanced, she says, by sustained macroeconomic stability and a faster reduction in the heavy public debt burden. A commitment from the government to reach its 2008 primary surplus target through spending adjustments would boost confidence in the ability of the Brazilian government to meet fiscal goals.