SAO PAULO (Reuters) -Fitch Ratings affirmed on Friday Brazil's long-term foreign-currency issuer rating at "BB" with a stable outlook, saying the first year of President Luiz Inacio Lula da Silva's third term in office "has shown broad policy pragmatism."
Lula's government is advancing with revenue-enhancing measures, Fitch said in a statement, but said its policy discipline has been tested by demands from the president's Workers Party (PT) and a difficult relationship with Congress, which slowed progress on some initiatives.
Fitch also said the government's target of erasing its primary budget deficit next year appears to be "increasingly doubtful," with uncertainties on measures already enacted, while several actions still require approval by Congress.
In July, Fitch had upgraded Brazil's rating to "BB" from "BB-minus."
After reaching a peak credit rating in 2011, Brazil lost all its investment-grade scores by early 2016, following a series of domestic and international crises, and the end of the global commodity market boom.
An investment-grade rating, which can reduce borrowing costs for countries, is measured by Fitch as "BBB-minus" or higher.
Earlier this year, S&P raised Brazil's outlook rating to "positive" from "stable", affirming its "BB-minus" rating.
Moody's (NYSE:MCO) rate on Brazil stands at "Ba2".
Fitch said on Friday that the country's current ratings were supported by its "large and diverse economy, high per-capita income, and deep domestic markets and a large cash cushion."
But the ratings are constrained "by weak economic growth potential, relatively low governance scores, high and rising government debt/GDP, and budgetary rigidities," Fitch said.