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.