Brazil investment grade `more difficult,' Fitch says

Brazil's path to an investment grade rating is ``more difficult'' as a global credit crisis threatens to reduce liquidity and economic growth, Fitch Inc.'s Peter Shaw said.

``It's hard to make any comments on timing, but the recent events weren't in our considerations six or nine months ago,'' Shaw, managing director of Fitch's Latin America Bank Group, said in a Bloomberg Television interview today. ``It's a little more difficult.''

The wreck of the U.S. subprime mortgage market forced 45 of the world's biggest banks and securities firms to write off more than $195 billion. The losses may lead banks to reduce credit and oppose economic growth.

``Brazil's property biggest challenge is to show it can sustain the economic growth,'' Shaw said. ``The perspective for global growth is less optimistic, and this won't help.''

The Federal Reserve has cut its benchmark rate 3 percentage points since September to help reduce the impact of the crisis that has infected financial markets around the world.

Fitch increased Brazil's credit rating to BB+ from BB in May. The rating is one level below investment grade.

Brazil's gross domestic product increased 5.4 per cent in 2007, the fastest pace since 2004, the government stated last week. Growth in Latin America's biggest economy has been supported by record low interest rates and wage increases, which are fueling demand for goods such as cars, homes and electronics.

State and non-state bank lending in Brazil property increased 28 per cent in the 12 months through January to a record 944.2 billion reals ($559 billion), according to the central bank figures.

Shaw expects lending to increase more than 20 per cent this year. ``Banks are financing this growth of credit with their own resources or funds from the domestic market, and they can continue to do so,'' he said.