Brazil's government scrambled yesterday to stem investor panic over imminent presidential elections after Moody's dealt a fresh blow to the punch-drunk economy by cutting its debt outlook to the level of Lebanon.
The US credit rating agency's downgrade added momentum to the vicious cycle plaguing Latin America's largest economy.
Brazil's currency, the real, slipped, and came under still more pressure as cash-starved companies scraped for dollars to pay off foreign debts and substitute dried-up credit lines.
Finance Minister Mr Pedro Malan vowed Brazil would overturn the vote of no confidence delivered by Moody despite a $30 billion (€30.67 billion) bail-out from the International Monetary Fund last week.
And President Fernando Henrique Cardoso, eager to preserve his legacy of economic stability, prepared to meet with opposition candidates leading the October race to lay the groundwork for what he hopes will be a smooth transition.
"We are going to reverse this process, I have no doubt that Brazil is going to turn the game around," Mr Malan told reporters.
"Brazil is bigger than this turbulence." But as Brazil's real slipped again, dropping 0.6 per cent to 3.18 reals per dollar, analysts questioned if any measure would be enough to steady Brazil before the vote.
Investors have dumped the currency along with Brazilian stocks and bonds, fearing a victory for one of two left-leaning candidates atop the polls could lead to a default on $250 billion in net public debt.
Wall Street worries that front-running leftist Mr Luiz Inacio Lula da Silva or centre-leftist Mr Ciro Gomes, if elected, could undo Mr Cardoso's free-market policies that helped make Brazil the number two recipient of foreign investment among emerging markets. - (Reuters)
