Arguing that a lower economic growth and a higher fiscal deficit are expected due to the effects of the covid-19, the agency decided to modify from BB to BB- the country risk rating.
The situation of the tax burden in the country is another factor affecting Fitch's decision, which was communicated to the Banco de Guatemala through the preliminary bulletin that the agency sent to the authorities.
Fitch Ratings forecasts that the insurance sector in Central America will close 2018 with a year-on-year increase of almost 6% and expects that in 2019 the business will reach a very similar growth rate.
The projected increase for 2018 and 2019 would be based on the behavior of the Panama, Costa Rica and Guatemala markets, however, the increases of 5.8% and 6.1% forecast for 2018 and 2019, respectively, would represent a slowdown regarding the 8.2% growth registered in 2017.
In 2010 average household debt per household was around $3,000, and last year, just six years later, the figure exceeded $6,500.
Data compiled by Nacion.com shows that the average debt of each Costa Rican household indicated in the analysis only takes into account financing with supervised entities, meaning that it could be be omitting loans taken out for consumption through other sources of unregulated financing, such as pay day lenders and pawn shops, among others.
Fitch Ratings predicts good performance for the sector, but warns of risks such as intense competition in rates, exposure due to natural disasters, and inflation.
Fitch Ratings believes that the insurance industry will perform well in 2014, however, it does not rule the possibility that some factors such as strong competition in rates, exposure to natural disasters, inflation and devaluation of currencies in some countries will continue to exert pressures.
The ratings agency Fitch Rating puts El Salvador along with Argentina, Jamaica and Venezuela, in the group of countries in the region which will grow the least in 2013.
Elmundo.com.sv reports that "El Salvador, along with Venezuela and Argentina, is the country with the worst credit rating in Latin America, according to a report by the risk measurement agency Fitch, which categorizes the prospects of credit rating of these countries as 'negative'.
Fitch Ratings believes that improving the level of efficiency in the banking system would result in a notable increase in profits.
The required improvements in efficiency in the banking systems in Central America could have a positive impact on earnings, on the internal generation of capital and, ultimately, on risk ratings, according to a report by Fitch Ratings.
The rating agency Fitch Ratings has raised its grade to BBB and the perspective changed from positive to stable.
The way the government has structured its debt and the economic boom the country is experiencing are some of the elements that justify the improvement in the rating given by Fitch Ratings.
In addition, banking stability and political consensus among political parties on the economic direction that the country should take have also influenced the revision of the grade.
Fitch suggests an increase in tax burden in order to improve government spending and thus achieve higher social spending.
This will improve the country´s risk ratings and thus attract investment, said Erick Campos, Executive Director of Fitch.
Sigloxxi.com includes statements from the executive, "Guatemala has maintained a record of good macroeconomic management, which has allowed it to have good credit ratings, but cannot advance any further because social conditions are not the best, so to progress, the State must increase social spending and therefore needs more revenue. "
Fitch Ratings highlighted in their report a “relatively stable” performance of the insurance industry in 2010.
The performance of the Guatemalan insurance industry in 2010 has been relatively stable, despite the occurrence of two catastrophic events (storm "Agatha" and the eruption of the "Pacaya" volcano in late May) and the generally stagnant premiums of the main operating branch of the industry: Motor Vehicle Insurance.
The company was no longer offering their policies since April, 2010, and their main asset was a license to operate in the Salvadoran insurance market.
The establishment in 2009 of holding company Mapfre La Centroamericana, whose stock is owned 65% by Mapfre Mundial Holding, joined regional operations with Panamanian Aseguradora Mundial.
Since they already had their own business (Mapfre La Centroamericana), consolidation of operations involved the sale of Aseguradora Mundial S.A.- Personal Insurance, which had losses of $ 247,000 at the end of June 2010.
A report from Fitch indicates that only in 2011 the Banks of Central America will reach profitabilitye levels that could be compared to those before the crisis.
Fitch thinks that the majority of Central America's banking systems will earn more profits than in 2009, but it will not be until 2011 when they reach profitability levels comparable to the ones they had before the crisis.
Fitch Ratings has recently confirmed that the country's local and foreign currency risk classification as 'BB', with Outlook Negative.
El Salvador's main credit weaknesses include its comparatively slow GDP growth, a narrow income base and rigid fiscal policy, particularly apparent in the light of the country's vulnerability to the US economic slowdown and corresponding drop in capital movement.
Fitch Ratings has announced that the country’s long term foreign and local currency rating remains “BB” with a negative outlook.
Fitch has also announced El Salvador’s short term rating as “B” and the country’s rating as “BBB-”.
El Salvador’s risk profile is a function of its monetary stability (helped by its official dollarization), a good history of structural reform, a stable financial system and the continuing support of multinational institutions. In addition, the country has coped well with the global financial crisis and unprecedented domestic political transition, in which the left-wing FMLN government took power after approximately 20 years of rule by the right-leaning ARENA party.
Illegal insurance would continue existing in Costa Rica, despite opening the market and tighter supervision.
The former monopoly by the National Insurance Institute of Costa Rica (INS) favored the sale of insurance by companies without presence in the country, specially in the life insurance segment.
Eduardo Recinos is the Director of Insurance at Fitch Ratings Centroamérica.