Moody’s changed the outlook on Brazil’s Ba2 issuer rating to negative from stable. The agency cited “the rise in uncertainty regarding reform momentum following recent political events” as one of the driving factors to the decision.” Moody’s sees a risk that such events could “undermine the government’s reform agenda and stall passage of future reforms, including social security”. The announcement comes a few days after a similar decison by S&P to change Brazil´s outlook to negative.

The central government posted a surplus of BRL 12.6 billion in April under the National Treasury’s methodology, topping our estimate (BRL 8.2 billion) and market expectations (BRL 7.2 billion). Over 12 months, the central government’s primary deficit remained at 2.4% of GDP. Year-to-date, the result is in line with last year’s. Compared to our forecasts, revenues were higher by BRL 1.9 billion, while expenses were lower than we anticipated, by BRL 2 billion. The discrepancy reflected larger revenues from oil royalties and lower discretionary expenses, confirming the government’s large effort to meet the target for the primary deficit in 2017 of BRL 139 billion. Excluding results related to FX swap transactions, interest expenses over 12 months stood at 7.4% of GDP in April. The nominal deficit remained at 9.7% of GDP, pressuring public debt. Accounting for FX swap trading results, the nominal deficit reached 9.2% of GDP (gains receded to 0.5% of GDP from 0.7%).