Fitch Ratings confirmed the long-term foreign currency debt default rating of "BB", but changed the outlook from stable to negative.
The review of Guatemala's negative outlook reflects political tension and greater uncertainty in agents, as well as a constant erosion in the government's low tax collection, the rating agency argued.
Highlights include a long history of macroeconomic stability even during political crises, and authorities' commitment to fulfilling public debt obligations.
From a statement issued by the Bank of Guatemala:
After its recent visit to the country, the rating agency Fitch Ratings confirmed on Friday April 29, 2016, the credit rating of Guatemala at BB with a stable outlook.
In the view of Standard & Poor's the resignation of Perez Molina and the customs fraud will not have a negative impact on debt ratings in the short-term.
From a statement issued by Standard & Poor's:
Mexico City, September 3, 2015.- Otto Perez Molina resigned from the presidency of Guatemala after the National Congress withdrew his legal immunity. Perez Molina now faces a legal process to defend himself against accusations that he was involved in the case of customs fraud, which also involves other key members of his government.
Standard & Poor's has warned of the risk of default in the next two years and reduced the rating for the sovereign debt of Venezuela, the principal debtor of the Colon Free Zone.
From a statement issued by Standard & Poor's:
OVERVIEW
The Venezuelan government's failure to take timely corrective actions to address growing economic distortions has contributed to economic deterioration and shortages of foreign exchange.
"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."
The country's macroeconomic strength contrasts with its credit weakness and low tax base, which Fitch Ratings believe keep its ratings below investment grade.
Fitch Ratings recently affirmed Guatemala's local and foreign currency Issuer Default Ratings as BB+. The main positive factors contributing to this risk evaluation are its history of macroeconomic stability and debt repayment combined with low debt burden.
Central American countries still need to improve their economic performance to reach investment grade ratings.
On its Quarterly Country Risk report for June 2010, the Central American Monetary Council (SECMCA), notes that Moody’s Investor Service improved the foreign currency risk ratings for Guatemala and Nicaragua. For Guatemala, the criteria for this improvement included a stable macroeconomic environment, backed by prudent fiscal and monetary policies, and for Nicaragua improvement in debt indicators and low fiscal deficits.
Fitch downgraded Mexico's Issuer Default Rating (IDR) from 'BBB+' to 'BBB' in foreign currency and from 'A-' to 'BBB+' in domestic currency.
Both ratings have a 'Stable' outlook. Additionally, the country's ceiling was reduced to 'A-' from 'A'.
Fitch downgraded Mexico's ratings because the country's fiscal situation has gotten worse with the financial crisis and a reduction in Mexican oil production.
Quarterly Report by the Executive Secretary of the Central American Monetary Council, June 2009.
General Situation
During the first months of the year, there has been a deterioration in some economic indicators like foreign investment, remittances and external trade. Based on this, the Executive Secretary estimates that the consequences of the international crisis were felt the most in the CA-RD region in the first third of the year, situation that could worsen further in the coming months, depending on what happens in the international stage.