Brazil's Stocks Soar as S& P Upgrades Its Debt Rating

SAO PAULO, Brazil, April 30 -- Standard & Poor's Ratings Services on Wednesday raised Brazil's debt rating to investment grade, a key benchmark in the nation's economic transformation. The news sent domestic stocks soaring.

The long-awaited upgrade came two months after Brazil's Central Bank declared that the nation's debt crisis was over because it had emerged as a net foreign creditor for the first time.

"The upgrades reflect the maturation of Brazil's institutions and policy framework, as evidenced by the easing of fiscal and external debt burdens and improved trend growth prospects," S&P credit analyst Lisa Schineller said in a statement announcing the rating boost.

Brazil's benchmark Ibovespa stock market index jumped 6.3 percent after the upgrade was announced, hitting an intraday record. The Brazilian real also rose sharply against the U.S. dollar.

Central Bank President Henrique Meirelles said the upgrade illustrates the stability of Brazil's once notoriously volatile economy.

Predictable government monetary policy and steady growth have prompted most experts to predict that the country's traditional boom-and-bust economic cycles are a thing of the past.

Latin America's largest country, which defaulted on its debt in the 1980s and declared a moratorium on debt payments, is riding a boom in demand for such key exports as beef, iron ore and soy. Brazil's trade surplus was $40 billion last year.

The upgrade is a huge victory for President Luiz Inácio Lula da Silva, elected in 2002. At the time, investors were predicting that the former radical union leader would wreck the economy.

Instead, Silva surprised financial players and angered members of his leftist base by sticking to orthodox monetary policy, which has translated into bigger corporate profit but has also helped the poor by reducing inflation and creating more jobs.

Schineller said Brazil appears on track for sustained economic growth of between 4 and 4.5 percent after its gross domestic product grew 5.7 percent last year.

Despite a global credit crunch, S&P said that Brazil's "maturing growth outlook" makes it an attractive investment option, noting that direct foreign investment is on track this year to match last year's $34.6 billion record.