The upgrade underscores the increasing importance of Brazil's economy on the world stage, even as many developed nations continue to struggle, in some cases seeing their own ratings tumble.

The move means Brazil's rating from Fitch is now one notch higher than Portugal's as a sovereign debt crisis among several euro zone nations has roiled markets for more than a year.

Fitch singled out spending cuts promised by new President Dilma Rousseff that would shave $30 billion off the country's budget. Public spending bloated last year ahead of October's presidential elections in what many analysts called a bid to boost Rousseff's candidacy.

Rousseff won — but she also inherited a fiscal mess from her mentor and predecessor, former President Luiz Inacio Lula da Silva.

"The hard part now will be going beyond this," said Flavio Serrano, a senior economist with Espirito Santo Investment Bank. "This challenge, of an upgrade, has to be met on the fiscal side. The government has to implement a more rigorous fiscal policy."

The government's free spending has pressured inflation and interest rates. That, in turn, indirectly contributed to a worrisome currency rally as yield-chasing investors have poured money into Brazil.

The Fitch upgrade could spur further inflows, the country's finance minister, Guido Mantega, said Monday.

"It's true, the more solid the Brazilian economy is the more it tends to attract foreign investments in dollars, which at the moment is a problem," he said.

"But it's better to have this problem, of excess dollars, than the problem we had in the past, a lack of dollars," he said. "The government will keep taking measures to contain the excess dollars."

Brazil's currency, the real, strengthened 0.06 percent to 1.609 per dollar in the afternoon. Brazil's benchmark Bovespa stock index briefly accelerated gains on the news.

Analysts see Brazil's economy growing 4.0 percent this year, according to a weekly central bank survey of local economists.

While that's a slowdown from the brisk 7.5 percent pace of last year, it's still likely good enough to make Brazil a better performer than most other major economies this year.

Fitch estimates the sustainable potential growth rate of the Brazilian economy has increased to 4 to 5 percent, which should support the medium-term fiscal outlook and the continued strengthening of the country's external liquidity position.

Fitch raised Brazil's foreign- and local-currency issuer ratings to BBB from BBB-minus. It was the first among the big-three ratings agencies to upgrade the country to the second-lowest level of investment grade. The outlook on the new ratings is stable.

Moody's has also said it may upgrade Brazil before summer, while Standard & Poor's still has the country at BBB-minus with a stable outlook. Both agencies currently have Brazil at the lowest investment-grade level.