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Delay in Vaccination = Downgrading of Risk Ratings

For Fitch, the delay in vaccination campaigns constitutes a latent risk of a prolonged pandemic, which would delay the recovery of the region's economies and would cause negative pressures on the risk ratings to be issued in the coming months.

Wednesday, May 26, 2021

Fitch Ratings issued a bulletin for Mexico, Central America and the Caribbean on May 25, in which it warned that given the deep economic contractions in the region and the moderate recovery outlook, there are threats of negative rating pressures.

See "Covid Passport: Essential for Economic Recovery"

According to the rating agency, a substantial increase in unemployment in the region, combined with a tepid recovery in tourism, may delay the recovery of the overall economy. In addition, the slow progress of vaccination remains a latent risk of a prolonged pandemic, the analysis highlights.

The rating agency notes in its latest report that the vaccination campaign in Honduras, Nicaragua and Guatemala has lagged behind other cases.

Detail of the progress of the vaccination process against Covid-19 in Central America, with data as of May 25, 2021:

Country	Doses applied	% of population with at least one dose
El Salvador	1.74 millones	17.2%
Costa Rica	1.46 millones	17.2%
Panamá	954 mil	14.7%
Guatemala	363 mil	2.2%
Nicaragua	168 mil	2.5%
Honduras	164 mil	1.4%

The authorities agree with Fitch's analysis. Alvaro Gonzalez Ricci, Guatemala's Minister of Finance, told Prensalibre.com that "... 'we here effectively have to speed up vaccination, speed up the pressure to deliver the vaccines and start with a vaccination process, with which the infrastructure is already in place and what is missing is to speed up the dispatch of vaccines'."

Regarding tax collection and economic recovery in this context of health crisis, Fitch notes that "... tax collection in the region lags peer ratings, limiting governments' ability to provide fiscal relief, support economic recovery and, together with high interest payments, indicates relatively tight fiscal space."

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Source: prensalibre.com

Key entities

Fitch Ratings

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Central America

Insight

Public finances risk analysis Risk Rating Issuer Default Rating (IDR) risk rating companies vaccines covid19 coronavirus Public Finance Economics

Fitch Ratings: Negative Outlook for Panama

February 2021

Arguing that the pandemic has had a negative effect on the local economy and Panamanian public finances, Fitch Ratings downgraded the country's sovereign rating from BBB to BBB-.

Regarding forecasts for 2021, the rating agency expects Panama to experience an economic recovery with a real growth of 9.2%, driven by the economic opening, public investment projects such as the construction of Metro Line 3, exports from the copper mine, and the recovery of domestic consumption. This growth trend is expected to be maintained by 2022, informed the Ministry of Economy and Finance of Panama (MEF).

Costa Rica: Political and Fiscal Uncertainty Take Its Toll

June 2020

Standard & Poor's downgraded the foreign debt rating from B+ to B with a negative outlook, arguing that there is uncertainty due to the lack of flexibility of the Alvarado administration in implementing fiscal policy in the country.

The negative perspective in the new risk note, anticipates that there is a possibility that in the next 12 months the rating will be degraded again, if the authorities adopt policies that damage the country's financial profile.

The High Fiscal Cost of Anti-Covid-19 Measures

March 2020

For Moody's, the Costa Rican government's response to the Covid-19 crisis will put negative pressure on the country's fiscal profile.

According to the rating agency's analysis, the measures include a three-month moratorium on tax payments, a gradual reduction in corporate social benefit contributions and extended credit lines for the companies most affected by the economic recession.

El Salvador Among Economies with Worst Prognosis

February 2013

The ratings agency Fitch Rating puts El Salvador along with Argentina, Jamaica and Venezuela, in the group of countries in the region which will grow the least in 2013.

Elmundo.com.sv reports that "El Salvador, along with Venezuela and Argentina, is the country with the worst credit rating in Latin America, according to a report by the risk measurement agency Fitch, which categorizes the prospects of credit rating of these countries as 'negative'. "