The rating of the recent issuance of $800 million in global bonds is in line with the current sovereign rating of El Salvador, BB with a negative outlook.
Wednesday, December 5, 2012
The analysis of the rating indicates the country's macroeconomic stability as a product of dollarization, the adequate capitalization of its financial system, and its strong history of compliance with international obligations.
The growth prospects for the country are lower than those of similar countries, mainly because of low levels of competitiveness, low investment levels and high crime rates. Government initiatives to accelerate growth and improve the business climate have been slow to materialize. According to Fitch, the uncertainty of the global economy adds more risk to the country's situation.
Tax collection continues to grow, based on fiscal reforms and administrative measures, but the tax burden is below the average of other countries in category B. Overspending has negatively affected building efforts. The deficit of the nonfinancial public sector reached 3.9% of GDP in 2011, and Fitch expects consolidation in the next few years.
The debt burden rose in 2011, reaching 52% of GDP (up from 39% on average in the countries rated BB). Fitch expects it to remain above average in 2012 and 2014.
Arguing that a lower economic growth and a higher fiscal deficit are expected due to the effects of the covid-19, the agency decided to modify from BB to BB- the country risk rating.
The situation of the tax burden in the country is another factor affecting Fitch's decision, which was communicated to the Banco de Guatemala through the preliminary bulletin that the agency sent to the authorities.
"Weak public institutions in Guatemala and a polarized political environment continue to limit its credit quality" - Standard & Poor's
An article in elperiodico.com.gt reports that "The three most important credit rating agencies internationally: Moody's, Standard & Poors and Fitch Ratings, have pointed to deficient management in Guatemala's social indicators."
Fitch Ratings has downgraded the economic perspective of the rating, making it negative outlook BB.
From the press release by Fitch Ratings:
Fitch Ratings - New York - July 24, 2012: Fitch Ratings affirms its ratings for El Salvador as follows:
- Long-Term Ratings (IDR) in foreign currency and local currency 'BB';