BRICS Holding Steady on Ratings, But Maybe Not Agency Status Quo

Three of the four BRICs Nations received positive news from various “Big Three” ratings agencies over the last two weeks, with the latest coming Monday. Meanwhile, an agency in the fourth member, with ties to the state, has reportedly been reaching out to ratings agencies in fellow BRICs nations and beyond to test the waters for creating a more powerful competitor to the three dominant and highly criticized U.S.-based ratings agencies.

On Monday, Moody’s Investment Services affirmed the rating for India’s foreign currency and local currency debt levels, while setting its credit outlook at stable. Moody’s also noted that, despite fears of some level of cyclical downturn in the nation, its economic diversity likely was strong enough to absorb the blow without significantly negative ramifications.

The Moody’s report came just days after Fitch Ratings affirmed Russia’s long-term former and local currency issuer default ratings and noted they have a positive outlook. Despite Russia’s reputation for corruption and over-dependence on few sectors (natural resources/oil production), Fitch highlighted that the nation gains balance from a strong balance sheet and improved exchange rate flexibility. Additionally, unlike Standard & Poor’s concerns noted in the weeks prior when that agency upheld Russia’s credit ratings, Fitch appeared unconcerned with upcoming Russian elections, intimating that former president Prime Minister Vladimir Putin has maintained a high level of power and return to his previous position. Thus, there should be few disruptions or significant structural reforms.

For Brazil, S&P previously (Aug. 25) heralded the newfound economic stability of Brazil by announcing it would hold the nation’s outlook in the “positive” category despite concerns of inflation and the recent regime change. S&P also held its investment and foreign-currency ratings stable, though they are considered low. It has been intimated that Brazil could see an upgrade to one or both before year’s end.

Meanwhile, each of those three nations could play a role in a sort of credit-ratings coop reportedly being considered by China-based Dagong Global Credit Rating Co. Dagong reportedly is considering enlisting the help of ratings agencies in other BRICs nations as well as some in South Korea and even Europe to create a direct competitor to the U.S.-based agencies. Each of the three has been criticized tremendously and repeatedly for its failings in ratings outlooks during the run-up to the global economic downturn as well as for some of its ratings downgrades in recent months, especially of sovereign credit ratings in European nations. The agency notably downgraded the U.S. soverign credit rating this summer during the week following S&P's now infamous decision to do so.

Brian Shappell, NACM staff writer