The Minister of Finance, Fernando Haddad, celebrated on Tuesday afternoon the upgrade of Brazil’s credit rating by S&P, and stated that the tax reform, highlighted by the rating agency as a determining factor for the change, was the “highlight” of a trajectory of coordination between the Executive and the Legislative for the approval of government measures.
“I think S&P was waiting for the outcome of the reforms proposed by Congress. Now I need to emphasize the harmony among the powers, when the Executive, Legislative, and Judiciary come together around a cause.
The agencies perceive that there is coordination around a higher goal, and the tax reform was indeed the highlight of this trajectory,” he said in an interview with journalists in Brasília.
Haddad also praised the performance of the President of the Chamber, Arthur Lira (PP-AL), and the President of the Senate, Rodrigo Pacheco (PSD-MG), in the process of approving the tax reform in Congress.
Ratings agency S&P raised Brazil’s long-term rating to “BB” from “BB-” during the afternoon, stating that the approval of the tax reform extends the track record of implementing “pragmatic policies” in the country over the past seven years.
However, Brazil’s rating remains in speculative territory, two notches below investment grade. S&P said that the outlook for the rating is stable.
Although celebrating the new rating, Haddad said he was unhappy that the country does not have investment grade, seen as a seal of good payer.
“A country that does not owe a penny in hard currency, that has more than 300 billion dollars in cash, cannot be without investment grade. It must have investment grade.”
The Minister also said that the country has a duty to achieve a growth rate “at least” in line with the world average, but emphasized that there is potential for the national economy to advance at an even higher pace if “we work well”.
According to him, these last two points should be the focus of the Ministry in the future, but he affirmed that achieving them also depends on a joint effort between the three powers.
S&P noted that the outlook for the rating is stable because the expectation is that Brazil will have slow progress in addressing fiscal imbalances, but Haddad stated that he sees the new fiscal framework as a guarantee of fiscal balance, despite the possible delay in undoing “years of dilapidation” of the country’s fiscal base.
According to the Minister, economic growth will reduce fiscal distortions, but this recomposition depends on constant articulations with Congress and the Judiciary.
“We want a trajectory of stability. We’re building that, but we also depend on the National Congress, it’s not through a decree that we will be able to generate this balance. So, it’s not something that happens overnight. It’s ten years of primary deficit.”