Effects of the Negative Risk Outlook

Guatemalan businessmen assure that the change from Stable to Negative made by Fitch Ratings in the country's risk perspective should be taken seriously, since investments could stagnate.

Monday, April 15, 2019

On April 11, Fitch announced that it maintained its "BB" rating for long-term foreign currency debt default, but decided to modify the outlook because the country reflects political tension and greater uncertainty in agents, as well as a constant erosion in the government's low tax collection.

See "Negative Risk Outlook for Guatemala"

Christian Nolck Rodriguez, president of the Guatemalan Association of Insurance Institutions (Agis), explained to Prensalibre.com that "... the change of that perspective must be taken very seriously and attend the points of view offered by the agency, which, although it is not the only point of view, if it is relevant and important for economic development. This situation could lead to stagnation, which at some point was observed to be more dynamic in the economy and especially in investment.

Alejandro Ceballos, president of the Apparel and Textile Commission (Vestex), stated that "... the scope of the effects of the note will not impact foreign trade (imports and exports), but rather the possible investments in the present and next fiscal year. Guatemala is looking for investments in the apparel and textile sector, but this kind of notes can "alter" the capitalists.

The presidential and congressional elections scheduled for this year may result in a government with a weak mandate, and are likely to lead to a fractured congress, represented by many political parties, resulting in continued political stagnation and diminished prospects for reform, was another argument Fitch put forward in its report.

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Citing a long history of fiscal and monetary policy characterized by prudent management, the rating agency Moody's maintained the country's credit risk rating in Ba1.

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Fitch Ratings has revised the Rating Outlook on El Salvador's long-term foreign and local currency Issuer Default Ratings (IDRs) to Negative from Stable.

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Long-term foreign currency IDR at 'BB+'; Long-term local currency IDR at 'BB+'; Short-term foreign currency at 'B'; Country ceiling at 'BBB-'.

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