Impeachment lowers uncertainties for Brazil, challenges remain

International credit ratings agency Moody’s said that former Brazilian President Dilma Rousseff’s impeachment removed an aspect of political uncertainty in the country, but a lot remains to be done to improve its credit outlook.

Rousseff’s successor, Michel Temer, who headed the interim government in the past several weeks, introduced a policy agenda that emphasized structural reforms so as to restore fiscal sustainability and improve market sentiment, Moody’s said in a statement on Thursday.

While these helped business confidence, a tangible improvement in Brazil’s fiscal accounts has not yet been seen, Xinhua news agency quoted the statement as saying.

“The government has had a measure of success in passing some reforms through Congress, but the details of key reform proposals such as the social security reform have yet to be hammered out,” Samar Maziad, Moody’s vice president and senior analyst, said in the statement.

Moody’s also expressed doubts as to whether Temer’s government could abide by the spending cap of 170.5 billion reais ($52 billion) established earlier this year.

“Complying with the proposed spending cap would be extremely difficult without the social security reform, as benefit payments currently account for about 40 percent of total federal spending,” the statement said.

Finally, it said that “the Temer administration’s ability to get Congress approval will be a key factor driving Brazil’s credit outlook during 2016-18,” it added.