Brazilian Finance Minister Joaquim Levy admitted on Thursday that there is a real possibility of the country seeing a downgrade of its sovereign bonds.
Credit rating agency Moody's announced on Wednesday its decision to change Brazil's outlook to negative, which led to speculations on whether the agency was planning to downgrade Brazil's sovereign bonds in the coming days.
Brazil currently has a Baa3 grade, and if downgraded further, the country will lose its investment grade altogether.
The agency attributed the outlook change to the political uncertainty with President Dilma Rousseff now facing an impeachment process. "The downgrade reflects reality. It is like a soccer team where, if you are not organized and there is no cohesion, results will be severe. Evidently, you have to work to get back to the division you think you belong to," said Levy, comparing the downgrade to being relegated to a lower division.
However, he ruled out the risk of Brazil not being able or willing to pay its debts. "Brazil's foreign debt, which is the one being rated, is relatively small, representing one-fifteenth of our foreign reserves. There is no risk of us not wanting or not being able to pay those debts," he said.
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