Moody's Investors Service, the credit rating agency, upgraded Brazil's sovereign debt rating on Thursday, saying strong exports and prudent debt management had helped make the country, South America's largest economy, less vulnerable to sudden swings in market sentiment.

In what many analysts said was a long overdue move, Moody's raised Brazil's long-term foreign currency rating to B1 from B2, putting it four notches below investment grade and on par with other heavily indebted emerging market countries like Turkey.The upgrade also put Moody's rating on Brazil in line with those of other credit agencies including Standard & Poor's and Fitch Ratings.

"It's no surprise, but it's still very good news," said Mário Mesquita, chief economist at ABN Amro in São Paulo. "What Moody's is basically saying is that the growth in exports is making it easier for Brazil to service its debt."

The upgrade may help reduce borrowing costs for Brazil, which is saddled with a public-sector debt burden equal to 55 percent of gross domestic product.

But already the rates it has to pay on its debt are receding. Brazil sold 750 million euros of eight-year bonds on Wednesday at a price to yield 8.7 percent, down from the 11.5 percent yield it paid to sell seven-year bonds in 2002.

Record exports of products like soybeans, steel and cars are also reducing Brazil's dependency on foreign borrowing by bringing in much-needed dollars. Exports have surged more than 33 percent so far this year to $62.7 billion, putting the country on track to rack up a record $90 billion in exports in 2004, according to the trade ministry.

Because of the strong exports, Brazil is expected to post a trade surplus this year of about $30 billion, up from a record surplus of $24.8 billion in 2003.

Moody's also said that the Brazilian government's efforts to reduce the volatility of its debt burden were bearing fruit, helping to shield the country from swings in market sentiment or a sharp devaluation of its currency, the real.

"The authorities have also substantially improved the composition of the domestic bond debt by increasing the share of fixed interest-rate debt and reducing the share of dollar-linked debt," Moody's said.

Since President Luiz Inácio Lula da Silva took office in January 2003, the central bank has reduced the ratio of the government's domestic debt linked to the dollar from 37 percent to about 14 percent - its lowest level ever - by aggressively buying back maturing securities indexed to the dollar.

Brazil's sovereign debt spreads, or the premium the country must pay over comparable United States Treasury bonds to borrow money abroad, narrowed 10 basis points to 495 basis points shortly after Moody's announced the upgrade, according to the J. P. Morgan Emerging Markets Bond Index Plus. Tighter spreads indicate improving investor confidence in Brazil.

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