Overview
S&P Global Ratings has reaffirmed Brazil's sovereign credit profile, maintaining long- and short-term foreign and local currency ratings at 'BB/B' and leaving the transfer and convertibility assessment at 'BBB-'. The agency kept the outlook on the long-term ratings stable.
Drivers behind the assessment
S&P's stable outlook reflects its expectation that Brazil's external position will continue to cushion the country against its fiscal frailties over the next two years. The rating agency points to several external strengths: sizeable commodity exports in agriculture and energy markets, the real's role as a floating and actively traded currency, substantial international reserves and comparatively deepening domestic financial markets that support financing for both public and private borrowers.
Fiscal and debt outlook
Despite those external cushions, S&P expects structural fiscal challenges to persist. The agency projects general government deficits to remain around 7% of GDP over the next several years unless policymakers take steps to reduce budgetary rigidity and lift primary surpluses. Linked to those deficits, S&P forecasts net general government debt to rise toward 74% of GDP by 2029, up from 60.4% of GDP in 2025.
Interest costs are also expected to remain a significant drain on fiscal resources. S&P anticipates the interest burden relative to general government revenue will be roughly 20% during 2025-2028.
Growth expectations and constraints
On the growth front, S&P projects real GDP to expand by 1.8% in 2026, down from 2.3% in the prior year and below the 3.2% average recorded in 2022-2024. The agency sees growth rising toward 2.2% by 2028, but still constrained by lower yet elevated real interest rates which are expected to offset favorable trends in agriculture and hydrocarbons.
Brazil is scheduled to hold national elections in October 2026, with President Luiz Inacio Lula da Silva identified as the front-runner for a consecutive term.
Potential rating actions
S&P sets out clear conditions that could prompt changes to the rating within a two-year horizon. A downgrade would be possible if policy choices widen fiscal deficits or if inaction undermines government financing conditions. Conversely, an upgrade could occur if policy initiatives deliver sustained higher trend growth or if authorities implement measures that raise primary balances - steps that S&P notes would require a more flexible budget framework.
Note: This article presents S&P Global Ratings' assessment and the projections cited by the agency. It does not add or alter the metrics and forecasts provided by S&P.