Going Into Debt to Survive

As a result of the economic crisis generated by the pandemic, it is estimated that four out of every five Central American companies were forced to increase their debts in order to sustain their operations.

Friday, March 12, 2021

According to the 2021 Regional Survey on economic reactivation prepared by the Federation of Chambers of Commerce of the Central American Isthmus (Fecamco), the resources obtained through indebtedness, served the companies to pay payroll, face rents and support operations.

The sample for this study was of one thousand companies in the region and was carried out in February 2021. The survey indicates that 7 out of 10 companies consulted indicated that they had been affected and the average loss per company surveyed amounted to $415 thousand.

Raul Delvalle, president of Fecamco, told Prensalibre.com that "... from July 2020 to February this year, 55% of the companies continue operating and 40% remained active. 'This is a positive aspect, because it reflects that business activity did not fall drastically."

Regarding the financial situation of the companies, Delvalle added that "... 37% of companies had to make some kind of negotiation with the banks, which meant 51% in the increase of their debts. 'It is there where the need to have some kind of banking moratorium law is reflected and that extends the period of interests to the affected companies, and that in a moment can be seen accumulated'."

61% of the companies reduced working hours, but a positive aspect is that nine out of 10 will keep the current workforce stable during 2021, is another conclusion of the study.

Check out the "System for monitoring markets and economic situation in Central American countries", elaborated by CentralAmericaData.



More on this topic

Covid-19: Survey of Damage in Costa Rica

February 2021

Given the economic crisis generated by the covid-19 outbreak, nine out of ten companies operating locally reduced their revenues and one out of three made temporary closures.

Between May and August 2020, a COVID-19 section was included in the Directory of Businesses and Establishments (DEE) as part of the update, in order for businesses to indicate what the main effects of the pandemic were.

Public Finance with Reserved Forecast

August 2020

In this regional context of economic crisis, falling fiscal revenues and increasing public debt, Costa Rica's debt level is expected to rise to 75% of GDP by 2021, and in the case of El Salvador, the indicator could exceed 85%.

The outbreak of covid-19 in Central America forced the government to declare severe household quarantines and to restrict several economic activities, restrictions that in some cases are still in place after five months of health and economic crisis.

Working Hours Reduced for Survival

July 2020

In the context of the economic crisis, it is estimated that companies in Central America have reduced the working hours of employees to an average of 32 hours per week.

As a result of the spread of covid-19 in the countries of the region and the imposition of strict home quarantines, demand for products and services has fallen considerably in most markets.

El Salvador Issues $1 Billion in Debt

July 2020

On July 8, the Salvadoran government issued $1 billion in bonds on the international market at a 9.5% interest rate with a maturity date of 2052.

The resources collected through this international issue are part of the $3 billion debt issuance authorized by the government and will be used to finance the health and economic crisis resulting from the spread of the Covid-19.

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