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S&P downgrades Brazil's sovereign debt rating down to ‘junk’ status in attack on economy

CREDIT ratings agency Standard & Poor’s (S&P) downgraded Brazil’s sovereign debt rating to “junk” status yesterday, jeopardising foreign investment.

The move by the Wall Street institution piles more pressure on President Dilma Rousseff amid pushes by opposition figures to have her impeached.

S&P said that Brazil’s investment grade status, which it held for seven years, was gone and that the outlook on the country was negative.

“The political challenges Brazil faces have continued to mount, weighing on the government’s ability and willingness to submit a 2016 budget to ­Congress consistent with the significant policy correction signalled during the first part of President Dilma Rousseff’s second term,” the agency said.

Brazil is entering recession and is expected to see an even worse 2016.

The downgrade will make it more expensive for Brazil to borrow on international markets and much foreign direct investment, including from funds that only back investment-grade nations, will automatically be withdrawn.

While widely expected, the move came earlier than many analysts forecast and arrives at a time of extreme volatility for the Brazilian economy, with inflation hovering around 10 per cent and unemployment the highest it has been in decades.

And S&P said: The negative outlook reflects what we believe is a greater than one–in–three likelihood of a further downgrade.”

Last month nearly a million Brazilians took to the streets against attempts to overthrow Ms Rousseff and her Workers’ Party government.

Parliamentary Speaker Eduardo Cunha, a former Rousseff ally who has been leading calls for her impeachment, was charged the same day over a corruption scandal.

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