Fitch Ratings agreed to change the perspective of the region's banks from stable to negative, arguing that the current health crisis will affect financial institutions in all countries.
Considering the measures that countries have adopted in the last 15 days in economic matters, following the spread of covid-19, Fitch expects that there will be a decrease in the issuance of loans.
The governments of Costa Rica and Nicaragua will face greater challenges in obtaining financing in external markets, because of the lowering of their risk ratings by international agencies.
Arguing that Costa Rica reflects consistently large fiscal deficits, short-term financing needs because of a strong repayment schedule and budget financing constraints, Fitch Ratings reported on January 15 that the country's long-term foreign currency issuer default rating was downgraded from BB to B+.
...and I will tell you who you are. In their quest to reduce exposure to risk, banking correspondents have started to restrict the services they provide to gambling companies, remittance companies, and brokerage firms that are not related to banking groups in the region.
In order to reduce risk exposure, some international banks with correspondents in Panama and other countries in the region are failing to open accounts for or provide services for companies whose income comes from activities such as remittances and gambling.The banks' argument is that they are more likely to be used for money laundering. Even non-banking brokerage firms claim to have difficulty offering their customers products and services,"... since banks wont open accounts in which customers can deposit their funds and receive a return on their investment."
Moody's warns of the risks faced by banks in Central America in the context of a rising trend in interest rates and dollarization of their loan portfolios.
From a report by Moody's:
Mexico, September 14, 2016 -- Banks in Central America face rising asset risks as interest rates look set to rise in the region, pushing up debt service costs for borrowers, according to a report from Moody's Investors Service.
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:
It is difficult to understand - especially because it has been made public - how a major state bank has described the International Bank of Costa Rica as "high risk" while another main state bank has stated the opposite.
EDITORIAL
The banks involved are Banco de Costa Rica (BCR) and Banco Nacional (BN). Between them they are the owners of Banco Internacional de Costa Rica (BICSA), with 51% of the shares the first and 49% of the second.
A call is being made to professionals in the area of auditing and risk management to attend the first Latin American Seminar on Governance, Risk and Control on April 14 and 15 in Panama.
The Latin American Foundation of Internal Auditors (FLAI) and the Institute of Internal Auditors of Panama (IAI Panama), in partnership with the Institute of Global Internal Auditors (IIA Global) is convening the first Latin American Seminar on Governance, Risk and Control - SELAT GRC 2016 , on April 14 and 15 to be held in the Hotel Riu Panama Plaza, reported Panamaamerica.com.pa.
Basing its decision on the progress being made in the economy in fiscal matters, Moody's has raised the outlook rating from positive to stable.
From the press release by Moodys:
New York, May 11, 2015 -- Moody's Investors Service has today revised the outlook on Honduras' government bond ratings to positive from stable. Concurrently, Moody's has affirmed the foreign and local currency government's issuer ratings and senior unsecured ratings at B3..
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.
For the last four years the loan portfolio of the Salvadoran financial system has been growing at an average rate of 3.5%, below the 11% growth average in the rest of the region.
A report produced by the rating agency Moody's notes that growth in El Salvador's financial sector has been stagnant since 2010, as the total loan portfolio has not achieved growth rates above 3.5% per year.
Moody's is warning that countries with oil deals with Venezuela face risks if this country reduces or eliminates its financial support to the block.
A report by the rating agency notes that "In the countries of Central America and the Caribbean, the "most vulnerable" are Nicaragua and Jamaica, while less exposed are Honduras and Guatemala."
Moody's reached this conclusion after analyzing data from the current account balance of each member country, its dependence on oil imports, particularly on crude oil from Venezuelan.
Principal and interests will be guaranteed through a contigency loan granted by the Central American Bank for Economic Integration to the issuing company.
“Partial Credit Guarantees” is the name of the project that CABEI is preparing to assist companies in accessing regulated capital markets in the Bank's member states.
David Castillo's article at Capitales.com, points that "the plan is similar to a Stand By Credit Letter or Safe Credit Letter.
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.
Participants of the event will discuss new practices for assessing risks when granting credits.
The First Regional Congress on Administration of Financial Risks is taking place at the conventions center of hotel Tikal Futura in Guatemala.
"It features the participation of bankers, auditors and risk analysts and managers from Uruguay, the Dominican Republic, Argentina, Panama and Venezuela", reports Prensalibre.com.
The crisis has rapidly increased the levels of delinquencies, and getting paid on time and in form may be vital for an SME.
Maintaining liquidity has become a golden rule for businesses and one way to keep cash on hand is to simply stop paying suppliers. Of course, those who suffer most are companies that do not have bargaining power due to their size to recover unpaid debts and to devote resources to an adequate analysis of the risks of extending credit to each buyer.