Fitch rates Sao Paulo BBB

Fitch Ratings said it assigned a foreign-currency long-term rating of BBB for the State of Sao Paulo, along with a local-currency long-term rating of BBB, foreign-currency short-term rating of F2, local-currency short-term rating of F2, national long-term rating of AA+(bra) and national short-term rating of F1+(bra).

The outlook is stable.

The ratings consider its solid economy, sound budgetary performance and improvement in its operating margin after fiscal adjustments throughout the last decade, Fitch said.

The ratings also incorporate the financial flexibility offered by the federal government by allowing Sao Paulo to capitalize its interest payments owed to the federal government, the agency said.

Nevertheless, Sao Paulo displays a high debt burden, which includes debt with financial institutions and liabilities with the federal government, Fitch added.

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