Fitch Ratings affirmed Tuesday Brazil's long-term foreign and local currency Issuer Default Rating at 'BBB minus', with a stable outlook. The firm also affirmed the short-term foreign currency IDR at 'F3' and the Country Ceiling at 'BBB'.

Brazil's investment grade ratings are supported by a robust external balance sheet, further entrenchment of macroeconomic stability and a consensus across the political spectrum on the thrust of macroeconomic policies. Brazil's overall policy framework has strengthened in recent years and the response to the global financial crisis so far has been relatively sound, Shelly Shetty , the Senior Director of Fitch said.

At the same time, the firm noted that government's heavy debt burden, continued structural weaknesses in public finances, and a relatively modest growth performance remained rating constraints. Fitch expects the country's net sovereign external debt to fall by 46% in relation to the current external receipts in the current year compared to the median 17% decline of the 'BBB' rated peers. Fitch expects the general government debt to increase in the current year. The debt, which stood at over 60% of GDP, was significantly higher than the 'BBB' rated peers.

In the meantime, Fitch forecasts Brazil's GDP to contract by over 1% this year. However, the firm expects that the country's increased monetary policy flexibility, relatively sound financial system and a large domestic economy will allow it to recover as the financial environment improves.

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