Economist Believes Latin America, BRICS Should Have Own Rating Agencies

MOSCOW, January 13 (Sputnik) — Taking into account that Standard & Poor’s, Fitch and Moody’s have published negative macroeconomics outlooks for MERCOSUR countries for 2015, emerging markets should have "more technological and more independent" credit rating agencies, Lia Valls Ferreira, fellow for the Brazilian Institute of Economics (IBRE) and Fundación Getulio Vargas, told Sputnik Nóvosti in an interview.

"Independent credit rating agencies have been needed in South America for a long time. In many cases rating agencies associated with neoliberalism of the International Monetary Fund and the World Bank, make forecast keeping in mind not only political and administrative specificity of South American countries, but also political motives," Ferreira believes.

However, the main problem of the creation of independent agencies is to achieve a high level of technical accuracy which would earn international confidence, according to the expert. Particularly, confidence is crucial when it comes to "attracting foreign investments which Latin American countries need to build infrastructure etc."

As for Brazil, which had its credit rating slashed from BBB to BBB- in March 2014 due to budget deficit and poor growth expectations, Ferreira thinks "an independent credit rating agency would make long-term outlooks, so it could raise confidence to the Brazilian economy, especially in case of long-term investments."

In this context, Ferreira made an indirect reference to the credit policy of the Brazilian Development Bank (Banco Nacional de Desarrollo de Brasil, BNDES) toward infrastructure projects, such as Puerto-Mariel in Cuba, which received a loan of more than $680 million from the Brazilian government. If the US and Cuba agree on lifting the embargo the project is expected to be very effective in the short term.

Besides, as the economist said, "not only Brazil and Latin America, but also many European countries" are "dependent" on rating agencies’ outlooks. It is important for Latin American and BRICS countries to establish their own agencies as a counter to the US agencies, she added.

Nevertheless, as Ferreira said, "it would be difficult to create a versatile and independent rating agency" and "the best way out would be establishing several agencies with a high level of technical accuracy to give a broader view of emerging markets."

It is the only way to counter the power of such agencies as S&P and Moody’s, who have the authority to decide what country has a strong economy and what country degrades, Ferreira said. The economist also called for MERCOSUR countries "to resume dialogue and joint actions" to overcome the negative scenario for 2015 predicted by the US agencies.