Brazil Officials Seek Credit Rating On Rio To Attract Funds - WSJ.com

Brazil Officials Seek Credit Rating On Rio To Attract Funds - WSJ.com

By Kejal Vyas
Of DOW JONES NEWSWIRES


MIAMI (Dow Jones)--Brazilian officials are in talks with ratings agencies to assign ratings to the city of Rio de Janeiro as part of a broader effort to attract more investors, the state finance secretary told Dow Jones Newswires Wednesday.

'Now is the right time,' said Joaquim Levy, adding that the move would be 'a signaling device' for investors. He said a rating on the city could come by next year.

While Brazil's sovereign credit is designated as investment grade at all the major ratings agencies, neither Standard & Poor's nor Fitch Ratings rates the city of Rio de Janeiro. Moody's Investors Service rates it Ba2, two notches below investment grade.

A spokesperson at S&P, which stopped rating Rio de Janeiro in 2002, said the firm doesn't comment on pending discussions.

Levy spoke on the sidelines of a Latin America hedge fund conference in Miami as the government looks to bring in overseas investors to help fund its massive overhaul of Rio de Janeiro in time for the 2016 Olympics.

Around $14 billion is expected to be needed just for revamping the city's infrastructure. The Brazilian government is expecting around 30% of funding for the Olympic games to come from private investors.

The rating could help mitigate risk premiums the state would have to pay if it were to borrow funds, though 'we're not planning to be aggressive in the markets,' Levy said.

Foreign investors' interest in Brazilian assets has soared this year as the country's economy, Latin America's largest, was able to avoid much of the global crisis thanks to its sound financial markets and increasing reliance on domestic consumption.

But many were alarmed by the government action Monday to install a tax on some incoming foreign investment, in a bid to curb the steep appreciation of the Brazilian real, which could weigh on its export industries.

'Chances are if you're an investor, you're not going to be happy about this,' Levy admitted, but said the measure will 'certainly be temporary.'

'It's not something we like to do but reality is not in your favor...we had to respond to the imbalance in the markets,' he added.

At the conference on Tuesday, Paulo Leme, Goldman Sachs' director of emerging markets, blasted the move to introduce levies, calling it a 'huge policy mistake that's not going to help at all.'

He added that it's a reminder that there are 'more changes to come that [investors] may not be too happy about' and that market participants should be tracking next year's presidential election closely because expecting continuity in accommodative economic policies could be 'naive.'



-By Kejal Vyas, Dow Jones Newswires; 212-416-2185; kejal.vyas@dowjones.com"