Fitch upgrades 19 Brazilian companies highly exposed to the country’s sovereign rating

Following last week’s upgrade of Brazil’s sovereign rating from “BB-” to “BB,” Fitch Ratings on Monday upgraded the long-term credit ratings of 19 Brazilian companies from “BB” to “BB+,” with a stable outlook. 

These organizations are directly linked to the country’s sovereign rating or are in some way exposed to the so-called country ceiling, which represents the risk that the private sector will be prevented from converting local currency into foreign currency or transferring the proceeds to non-resident creditors to service debt payments.

The companies whose ratings were raised were Petrobras, Sabesp, Rumo, Localiza, Engie Brasil, Rede D’Or, Energisa, Taesa, BR Malls, Alupar, Cesp, Comgás, MRS Logística, Energisa Minas Rio, Energisa Paraíba, Energisa Sergipe, Aché Laboratórios Farmacêuticos, TAG, and Globo.

Brazil’s upgrade last week was due to “better-than-expected macroeconomic and fiscal performance in the face of successive shocks in recent years, proactive policies and reforms that have supported this, and Fitch’s expectation that the new government will work towards further improvements.”

The country’s fiscal position, the agency warned, is deteriorating after an improvement in early 2023. Still, Fitch expects new fiscal rules and tax measures to anchor a gradual consolidation, with debt-to-GDP rising at a slower pace and from a much better starting point than previously forecasted.

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