Here is an excerpt from Moody’s latest note on the issue:
“The recent negative ratings drift for Brazilian companies in industries such as pulp and paper and airlines is broadly contributing to the ratings trends in Latin America… Exposure to Commodities, Currency Lead to Weaker Credit Trends for Brazil Corporates.
The past two-year period of positive or balanced rating actions in Latin America outnumbering negative actions came to an end during the last quarter of 2011…
We expect the ratings drift for the remainder of the year to be stable to negative, depending on cyclical exposure. Last year, we started to see a bifurcation, with a stable to positive trend in defensive sectors such as media, and telecom and negative in cyclical sectors such as pulp & paper, and passenger airlines.
Some homebuilders in Brazil are likely to see increased pressure as well. That’s because this sector faces cost overruns, logistical challenges in trying to process a very high number of homes being delivered, and high input costs, among other issues. It’s unlikely the industry will now turn free cash flow positive until late 2012, or even early 2013.
In addition, investors’ recent flight to quality as the debt crisis deepens in Europe means that only established and highly-rated companies will be able to tap the international capital markets for financing in the near-term. That’s a concern for lower-rated issuers as the absence of committed bank lines in Brazil may weaken their corporate liquidity.”