This downgrade lowers El Salvador sovereign debt to 'junk', down from Baa3, the lowest level of investment grade.

"Since last year, El Salvador has been subject to severe shocks that have exposed underlying vulnerabilities associated with its condition as a small open economy with a high dependence on the U.S. and a relatively limited degree of diversification," said Mauro Leos, regional credit officer for Latin America.

"The 'collapse of economic activity' has led to declining revenue in government accounts", "leading to higher deficits and debt ratios".

Source: Bloomberg.com

More on this topic

A Year After Costa Rica’s Investment Rating

September 2011

On 9 September 2010, Moody's raised Costa Rica’s sovereign credit rating from Ba1, speculative grade, to Baa3 investment grade rating with a stable outlook.

An analysis of the issue by Aldesa follows:

The agency acknowledged, among other things, a stronger national economy in the face of external shocks, a healthy position in terms of net international reserves, stability in foreign direct investment flows and a willingness to responsibly manage the fiscal deficit during the coming years.

S&P Does Not Give Costa Rica Investment Grade

February 2011

Standard & Poor's maintained a rating of "BB" for Costa Rica (speculative investment), not ratifying the rise awarded by Moody's in September 2010.

The report "Today in the Market” by Aldesa, states:

"The prestigious credit rating company, Standard & Poor's (S & P), confirmed a "BB" rating for the sovereign debt of Costa Rica, giving it a stable outlook.

Moody's upgrades Costa Rica's sovereign ratings

September 2010

Moody's Investors Service has upgraded Costa Rica's government bond rating from Ba1 to Baa3. The outlook, which had been positive, has been revised to stable.

RATINGS RATIONALE

The main drivers for the upgrade are:

1) Our expectation that key government debt metrics will continue to be

“Now More than Ever, Fiscal Discipline”

March 2010

In the wake of Panama’s upgrade to investment grade, experts are already calling to maintain the efforts that led to such achievement.

Fitch’s recent upgrade of Panama’s debt to BBB- is likely to be mirrored by other big rating companies, confirming Panama’s entrance into the club of investment-grade countries.