“The positive outlook reflects Brazil’s strengthening prospects for steady, long-term GDP growth, along with modest current account and fiscal deficits that should gradually reduce the country’s vulnerability to negative external shocks,” S&P said
The more bullish view comes as a number of South American nations – including Chile, Peru and Colombia – have been praised by ratings agencies for more than a year as they were less affected by the global economic slowdown than nations with more developed economies.
Robust economic growth in Brazil underscores the importance of emerging markets as the developed world struggles with a sluggish rebound from the global economic slowdown. The pace of growth in Brazil moderated a bit later in 2010 compared to expansion seen earlier last year, when government tax breaks on consumer goods sparked demand.
The country’s long-term foreign currency sovereign credit rating currently stands at BBB-, the lowest investment-grade rating. S&P raised Brazil’s currency rating out of junk in 2008.
S&P also praised Brazil’s recent steps to contain short-term inflation pressures which it said demonstrated the government’s commitment to contain macroeconomic risks.
Bank of America
Bank of America is expanding in Brazil with a new commercial banking license that will allow that US financial institution to take deposits and offer cash-management services to corporate clients in the country.
The license will give the largest US bank a competitive edge in one of the world’s fastest-growing economies and financial markets.
Brazilian issuers sold a record 290.7 billion reais (US$ 180 billion) in stocks and fixed-income instruments in 2010, compared with 107.2 billion reais the previous year, according to investment-banking association Anbima.
The license will also permit the Charlotte, North Carolina-based bank to manage customers’ day-to-day cash needs.
Brazil’s economy, which has experienced boom-and-bust cycles of inflation, currency devaluations and interest-rate swings since the end of military government in 1985 is back on track and growing sustainedly.
Latin America’s largest economy GDP expanded 7.5% last year, the most in two decades, compared with 2.8% in the U.S. and 1.3% in the U.K., according to the IMF. Unemployment is at record lows and credit at all-time highs.
“If we need to do a short-term bridge in real to help one of our clients acquire another client, we will now be able to do that,” said Mauricio Tancredi, Bank of America head of corporate banking for Brazil.
In the past, Bank of America could only do that “through off-shore funding now we will have both alternatives. We will definitely be more competitive”.