Standard and Poor's maintained the stable outlook of Brazil's investment rating despite a contracting economy and growing political upheaval, in a vote of confidence for President Dilma Rousseff's efforts to clean up the country's finances. S&P said on Monday it affirmed Brazil's BBB- rating due to an apparent economic policy reversal of Rousseff, a leftist who in her first four years in office eroded investors' confidence with her interventionist style and unchecked spending.
After her narrow re-election victory in October, Rousseff has signalled a U-turn, cutting expenditures and raising taxes to cover a widening fiscal gap and avoid losing the country's coveted investment grade.
"The stable outlook reflects our expectation that the politically challenging policy correction underway will continue to garner the support of President Rousseff," S&P said in a statement.
A commitment to fiscal austerity along with other policies to remove economic distortions would help recover the government's credibility and allow for stronger growth, the agency said.
"It is a victory for Rousseff and her new economic team," said Juan Jensen, chief economist with Tendencias in Sao Paulo. "We don't believe Brazil will lose its investment grade, but the economic team is under pressure to deliver solid fiscal results."
Rousseff appointed orthodox economist Joaquim Levy to lead that austerity. The policies are already under fire by Rousseff's rowdy alliance in Congress.
Measures awaiting approval in Congress account for half of the government's budget savings goal of 55 billion reais ($17.57 billion) this year.
Resistance in Congress to passage of key fiscal saving measures along with a sharp drop in Rousseff's popularity have raised fears about her commitment to the new-found belt-tightening.
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