Risk rating agency Fitch raises the credit rating of the city of Rio de Janeiro to the highest grade

Christ the Redeemer, Pão de Açúcar and the neighborhood of Botafogo Fernando Maia/Riotur Fitch Ratings, one of the main risk rating agencies in the world, raised the long-term national credit rating of the city of Rio de Janeiro to “AAA”, which is the highest quality investment grade. The agency indicates a perspective of stability and highlights that Rio de Janeiro, in recent years, has shown “consistent improvements in fiscal management”. In the comment that justifies the upgrade of the rating from "AA+" to "AAA", Fitch says that the municipality's results brought "solid operating margins and robust liquidity indicators" and states that it believes that "Rio's debt will gradually decrease over the rating horizon". The agency also reviewed the Individual Credit Profile (PCI) rating, the financial health indicator without considering external support, which advanced from “BB” to “BB+”, which means “medium to low” risk – and indicated a stable outlook for this assessment. Fitch also presented the following reasons for the decision: Risk Profile: ‘Medium to Low’ Financial Profile: Category ‘A’. Revenue Robustness: ‘Average’. Justification: "the municipality has relatively low dependence on transfers from the Union and exposure to volatile revenue sources"; Revenue Adjustability: ‘Weak’. Justification: "dependence on a small number of taxpayers, the limited capacity to adjust taxes and the history of federal intervention in subnational tax policy"; Expense Sustainability: ‘Average’. Justification: "Rio reports moderate control over expense growth, with solid margins and is up to date with its payroll." Expense Adjustability: ‘Weak’. Justification: "low capacity of the municipality to reduce expenses in response to reduced revenues"; Robustness of Liabilities and Liquidity: ‘Average’. Justification: "Rio has regularly paid off its obligations over the years, which results in a very low rate"; Liabilities and Liquidity Flexibility: ‘Average’. Justification: Fitch sets a limit of 100% for the average of the last three years. Rio reported an average liquidity ratio of 67.1%; Peer analysis in Brazil According to Fitch Rating, Rio's closest peer is the State of São Paulo, which has a long-term national rating of AAA and a stable outlook. Both, according to the agency, have a 'Medium to Low' risk profile and an 'A' financial profile. However, adds the agency, Rio's payback index (the period for the return of an initial investment), “which is less pressured and is at the upper level of the 'AA' category, explains why its PCI is one grade above that of São Paulo”. On a global scale, the rating of states and municipalities needs to be anchored in Brazil's sovereign ceiling, which remains at "BB", with a stable outlook. Credit rating: what it is, what it is for and what happens when Brazil loses its classification Credit rating: what it is and what it is for This grade is generally represented by letters, numbers and mathematical signs and normally goes from D, which is the lowest grade to AAA - the highest grade and the grades are classified, by organizations, into two main groups: speculative grade and investment grade and it is from this risk grade that investors can better assess whether it is worth investing capital in that country, whether there is a chance of gains that compensate for the risk of losing the invested capital - and whether that country's economy is stable or unstable. Another question that many people ask is what is this credit note for? This assessment is the instrument that will issue an independent opinion regarding the credit risk of the debt of that country analyzed. Some international pension funds, from European countries or the United States, for example, follow the rule that you can only invest in bonds from countries that are classified as investment grade by international agencies and that is why this "grade" allows the country to receive resources from investors interested in investing their money in that location.