Arguing a significant increase in liquidity risk and political divisions that are preventing approval of an issuance of long-term debt, the rating agency has downgraded the rating and changed the outlook to negative.
From a press release issued by Moody's:
New York, November 07, 2016 -- Moody's Investors Service has today downgraded El Salvador's issuer and long-term debt ratings to B3 from B1 and assigned a negative outlook to the ratings, concluding the review for possible downgrade initiated on 11 August.
The ratings agency has reduced the rating for long-term sovereign debt from B + to B, arguing that political capacity to resolve the fiscal problem is shrinking.
From a press release by Standard & Poor´s:
Continued political stalemate in El Salvador has led to a deterioration of institutional and governance effectiveness, which has contributed to a weaker external profile, and a further erosion of the government's liquidity.
A state of emergency has been declared and pressure has been put on the Assembly to approve borrowing in the order of $1.2 billion to honor short-term debts.
President Sanchez Ceren announced as a first step a declaratory emergency, so that before the close of 2016 they can 'attend to, discuss and build the best agreements that will provide the relevant results' on issues such as approval of bonds for $1.2 billion.With that amount the government hopes to deal with the illiquidity and respond to the state's short - term commitments.
The government has announced that with funding from the Italian Cooperation Agency it plans to build 400 apartments in the center of the capital.
The project is part of a comprehensive plan that also includes the construction of an art and craftsschool on three plots located in the center of the capital.The funds will be granted by the government to cooperatives, through which apartment buildings will be built.
A year after the announcement, the project to establish a marine cargo ferry between El Salvador and Costa Rica remains on paper.
Although it had been announced that the service would begin in late July 2016, it seems that the idea of a ferry transporting goods between the ports of Costa Rica and El Salvador at a base cost of $800 will not happen, at least for now.
Businessmen have described as a "disguised tax" the decree by the Sanchez Ceren administration which adds a fee for social investment on to the energy rate .
The decree states that the new charge of 13% within the tariff will begin on July 15 and notes that"... the charge for social investment will be part of the fees in the system, which are transferred to the entire electricity demand in the different markets managed by the Transactions Unit and will be calculated quarterly as a dollar value per megawatt hour, equal to 13% of the value of the average price of Transferable Energy rates corresponding to the previous quarter ".
On March 8, the government will auction two issues of Treasury bills in installments of 275 and 352 days, at a 12 month Libor reference rate.
From a statement issued by the Stock Exchange of El Salvador:
The Government of the Republic of El Salvador through the Executive Branch in the Field of Finance, Department of the Treasury, pursuant to what is authorized in Article 227 of the Constitution of the Republic, Article 72 and 73 of the State Financing Administration Act, Article 5 of the Law on State Budget, Fiscal Year 2016, contained in Legislative Decree No. 192 of 26 November 2015, published in the Official Newspaper La Gaceta No. 231, Volume 409, December 15 2015 and agreements of the Executive Branch in the Field of Finance No. 9 dated January 4, 2016 and No. 111 dated January 29, 2016, announces the next issue of Treasury Bills:
Threats made by organized criminals to transporters were carried out on monday when 7 drivers who had not joined the strike ordered by gangs were killed.
For the second consecutive day thousands of people "... were affected by a transport strike which was apparently the result of a vicious rumor mill unleashed by gangs that terrorized employers and employees in the sector, after the burning of several units and murder of motorists. "
Days after securitization was mentioned as an option to finance the expansion of the international airport, the government is now saying that it would be better to use pension funds.
Sending signals which only confuse and generate more uncertainty about such an important work as the extension of the main air terminal in the country, the Salvadoran government now says that using pension funds is the best option for financing the expansion.
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