Brazil getting close to non-IG status

Fitch Ratings has downgraded Brazil's sovereign rating to BBB-, with a Negative Outlook. Despite being the last agency of the triumvirate to downgrade Brazil closer to non-IG status, the fact that Fitch kept the rating outlook negative makes the risk of Brazil losing its IG status (ie, having two non-IG ratings) even more acute now. 

"Although Brazil's downward rating trajectory is likely well anticipated by markets by now, the continued negative outlook by Fitch following today's rating action may still have come as a surprise, given the conservative approach the agency has held thus far towards the sovereign rating", says Barclays. 

The agency cites the negative feedback loop between the political and economic crisis, hampering the growth outlook and raising debt levels, while the lack of conditions to break this loop is behind the negative outlook.