Exporters resent the effects of five continuous days of demonstrations, blockades and widespread insecurity on the roads of Costa Rica.
Before the strike, which was started a few days ago by unions representing the country's public institutions, the Chamber of Exporters of Costa Rica (Cadexco) denounced the fact that companies in the sector are facing multiple difficulties in exporting their products.Puerto Moín, the main outlet for exports, is onlyoperating six hours a day, leaving close to 12,000 tons per day unable to be shipped, which is estimated to be equivalent to almost $10 million in daily sales abroad.
Like lemmings running towards a cliff, Costa Rica repeats the kind of actions that underscore the definition of a society incapable of stopping on the road to a terminal crisis.
In line with recent warnings issued by other credit rating agencies regarding the country's bleak fiscal outlook, Fitch has reduced the debt rating from B + to B, and changed the outlook to negative.
From a press release issued by Fitch Ratings:
Fitch Ratings-New York-01 February 2017: Fitch Ratings has downgraded El Salvador's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B' from 'B+'.
The government and the opposition have finally reached an agreement and approved the Fiscal Responsibility Law along with the issuance of $550 million in debt securities.
The issuance authorized by the Assembly may be made on the international or local market, and funds will be used to pay principal and interest on short-term debt, budget support and strengthening of the Fiscal Fund at the General Treasury of the Republic.
The government and the opposition have agreed to approve in the first instance an issue of $550 million, not $1.2 billion as claimed by the administration of Sanchez Ceren.
Although the government insists that there is a need is to issue $1.2 billion to cover short - term debts and solve the liquidity problem it is facing, this first agreement to issue $550 million will serve to"... pay for the electricity subsidy for FODES and the mayoral districts."
The ratings agency has reduced the rating for long-term sovereign debt from B + to B, arguing that political capacity to resolve the fiscal problem is shrinking.
From a press release by Standard & Poor´s:
Continued political stalemate in El Salvador has led to a deterioration of institutional and governance effectiveness, which has contributed to a weaker external profile, and a further erosion of the government's liquidity.
A state of emergency has been declared and pressure has been put on the Assembly to approve borrowing in the order of $1.2 billion to honor short-term debts.
President Sanchez Ceren announced as a first step a declaratory emergency, so that before the close of 2016 they can 'attend to, discuss and build the best agreements that will provide the relevant results' on issues such as approval of bonds for $1.2 billion.With that amount the government hopes to deal with the illiquidity and respond to the state's short - term commitments.
Once again a warning has been given that without a fiscal agreement the country is at high risk of falling into debt default and losing access to international funding.
Elsalvador.com reports that "...Pedro Argumedo, from the Department of Economic and Social Studies at Fusades, said it is important to reach a Tax Agreement, as failure to do so would lead to consequences that would be 'terrible', and time is growing ever shorter."
The government has already reached 72% of the maximum amount of issuance of Treasury Bills that is permitted by law, and it only has $370 million available to borrow this year.
Given the critical fiscal situation, the Sanchez Ceren administration is insisting in the Legislature on the approval of a bill to issue another $1.2 billion in debt.According to the government, several commitments can not meet unless these funds are available.For the remainder of the year the only remaining possibility is the issuance of $370 million in short-term debt in the local market.
The government's inability to stop the growth of debt in the context of low economic growth and a high fiscal deficit is the reason for the reduction in the rating.
From a press release by Moodys:
New York, August 11, 2016 -- Moody's Investors Service has today downgraded El Salvador's issuer and debt ratings to B1 from Ba3 and placed the ratings on review for further downgrade.
The delay in payments to suppliers to the state, corresponding to July, reflects the complicated situation of public finances in El Salvador.
Arguing that"... July was a very bad month fiscally," Finance Minister Carlos Caceres, justified the delay in payment to suppliers of goods and services. According to the minister, in July the government "... had to pay $260million in external debt and Treasury bills."
The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.
From the "EconomicOutlook"section of the V Report on the State of the Region 2016:
A new proposal from the business sector aims not only to propose solutions to the fiscal problem but also strengthen productive areas in order to grow in a sustainable manner.
The National Association of Private Enterprise (ANEP) has summarized its proposals based on four pillars: economic growth, combating and reducing poverty, strengthening democratic institutions, and a pact on fiscal responsibility.
The IMF has insisted on the need for fiscal consolidation and warns that "if measures are not taken, the debt could rise to unsustainable levels."
From the press release by the IMF:
IMF Executive Board Concludes 2016 Article IV Consultation with El Salvador On June, 20, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with El Salvador.
The inability to carry out the issuance of $900 million further limits the possibilities of solving the fiscal problem affecting the country.
The Sanchez Ceren administration had intended to use the proceeds to refinance debt, pay pensions of officials and allocate funds to the Ministry of Education, according to the explanation given by the authorities at the Ministry of Finance.
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