Due to the deterioration of fiscal indicators resulting from the severe economic impact of the pandemic, Moody's downgraded the Panama Canal Authority's senior unsecured debt rating from A1 to A2.
Given that the A2 rating is three notches above Panama's Baa2 sovereign rating, a rating upgrade is unlikely in the near term. An upgrade would require the ACP to continue to strengthen independently and Panama's sovereign rating to be upgraded, the rating agency said.
Arguing that the pandemic has had a negative effect on the local economy and Panamanian public finances, Fitch Ratings downgraded the country's sovereign rating from BBB to BBB-.
Regarding forecasts for 2021, the rating agency expects Panama to experience an economic recovery with a real growth of 9.2%, driven by the economic opening, public investment projects such as the construction of Metro Line 3, exports from the copper mine, and the recovery of domestic consumption. This growth trend is expected to be maintained by 2022, informed the Ministry of Economy and Finance of Panama (MEF).
Arguing that due to the pandemic the current revenues of the General Government have been significantly reduced, Standard and Poor's downgraded Panama's sovereign rating from BBB+ to BBB.
The increase in total debt interest payments as a proportion of the General Government's current revenues is another factor that the rating agency considered when lowering Panama's rating.
Based on the argument that there is no significant fiscal consolidation and sustained economic recovery, the rating agency decided to downgrade the government's long-term issuer rating perspective from stable to negative.
Although the outlook was modified, Moody's decided to maintain the long-term issuer and senior unsecured debt ratings at Baa1.
The National Assembly of Panama approved in third debate a bill that regulates the service of information on the credit history of consumers.
The legislative plenary approved in third debate initiative 424, which modifies Law 24 of 2002 related to this registration system in the Panamanian Credit Association (APC), in order to create a data model or credit information that is fair and balanced between financial agents and credit clients, the Assembly informed.
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 rating agency maintained BBB's long-term issuer default rating, but decided to change the risk outlook from stable to negative, arguing that the debt burden will continue to increase in 2020.
KEY RATING DRIVERS
The revision of Panama's Outlook to Negative reflects a marked deterioration in fiscal deficits and a significant increase of the government's debt burden, related to accumulation of arrears by previous administration and higher fiscal deficit targets under the modified Fiscal Responsibility Law. In addition, the recent greater-than-anticipated growth deceleration creates additional challenges for fiscal consolidation.
Moodys confirmed that the country's investment grade is Baa1 with a stable outlook, arguing that the economy has a solid performance and that it reflects stability at the macro level.
In 2020, Moody's expects the growth of the Panamanian economy to recover to 4.5%, boosted mainly by a full year of production in the copper mine, according to the forecasts of the international agency.
Because of its financial and competitive strength, the rating agency Fitch Ratings confirmed that the risk rating as an issuer of long-term debt is "A", with a stable outlook.
The ratings reflect an underlying asset that is critical not only for Panama, but also for international trade, as evidenced by its stable volume performance, solid competitive position and well-diversified cargo mix, the ratings company explained.
Moody's assigned to Empresa de Transmisión Eléctrica de Panamá a Baa1 issuer rating, arguing that it reflects key credit strengths and is the only electricity transmission company in the country.
Gilberto Ferrari, general manager of Empresa de Transmisión Eléctrica (Etesa) explained to Panamaamerica.com.pa that "... This qualification is one of the most important milestones in the history of the company and the energy sector of our country.
Because of its strong and stable macroeconomic performance, Fitch confirmed the long-term foreign currency rating at 'BBB', with a stable outlook.
For the risk qualifier, the country's macroeconomic performance has driven a sustained increase in per capita income, and it also forecasts that GDP growth will recover to 5.8% in 2019 and 5.5% in 2020, above countries with similar ratings.
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 has downgraded the Brazilian construction company and does not foresee its financial profile significantly recovering over the next 12 months.
The construction company is currently running three major projects in Panama: the urban renovation of Colon, with a value of $537 million, the construction of Metro Line 2, for $1.8 billion, and the expansion of Tocumen International Airport.