Moody's upgrades Brazil to Ba1, one step from regaining investment grade

BRASILIA/SAO PAULO, Oct 1 (Reuters) - Ratings agency Moody's upgraded Brazil's long-term issuer and senior unsecured bond ratings to Ba1 from Ba2 on Tuesday, leaving Latin America's largest economy just one step away from regaining investment grade.

A higher rating reflects improved creditworthiness, enabling countries to issue debt at lower interest rates.

Moody's stripped Brazil of its investment grade status in 2016, as the global commodity market boom waned and the country faced a series of fiscal crises.

"The upgrade reflects material credit improvements which we expect to continue, including a more robust growth performance than previously assessed and a growing track record of economic and fiscal reforms that lend resilience to the credit profile," said Moody's.

However, the agency stressed that the credibility of Brazil's fiscal framework is still moderate, as reflected in its relatively high cost of debt.

Moody's in May revised Brazil's outlook to positive, a stance that was maintained on Tuesday.

Brazil's Finance Minister Fernando Haddad told reporters that if the government does not let its guard down in controlling public finances, President Luiz Inacio Lula da Silva's administration could regain investment grade by the end of its third non-consecutive term, in 2026.

Brazil received an investment-grade rating for the first time in 2008, during leftist Lula's second administration.

Based on S&P and Fitch's assessments, Brazil remains two notches away from achieving that grade again.

Fiscal concerns have raised the risk premium for Brazil's long-term debt.

Central bank chief Roberto Campos Neto said earlier on Tuesday he considered the extra-high long-term rates on Brazil's debt an

"exaggeration"

compared to the risk premium for other economies that are also not generating primary surpluses. (Reporting by Marcela Ayres in Brasilia and Andre Romani in Sao Paulo; Additional reporting by Victor Borges in Brasilia; Editing by Leslie Adler and Richard Chang)