The downgrade and Outlook change reflect increasing political instability and the corresponding deterioration of Nicaragua's investment, economic growth, and public finance outlook
From a statement issued by Fitch Ratings:
Fitch Ratings-New York-22 June 2018: Fitch Ratings has downgraded Nicaragua's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Negative.
Since the beginning of the week at least 500 cargo trucks from Central American countries have been unable to get around a blockade in the department of Carazo.
Since the afternoon of last Monday, traffic has reportedly been totally shutdown in the area known as Dolores, near the municipality of Jinotepe, because protesters opposed to the Ortega administration are blocking roads.
The Ortega administration has announced that with a donation from the Japanese government it intends to build and equip a new hospital in Nueva Guinea, in the South Atlantic Region.
Without revealing details of the date on which the work might begin, representatives from the Japanese embassy in Nicaragua announced that they will finance the start of works on the new hospital, which will have a construction area of 6,649 m2with capacity for 132 beds, four operating rooms, an emergency room, and other services.
In the view of Fitch Ratings, continued political unrest could undermine investment conditions and economic growth, as well as raise the risks of confidence shocks to the financial system and macroeconomic stability.
From a statement issued by from Fitch Ratings:
Fitch Ratings-New York/San Salvador-17 May 2018: Continuing protests and resulting political violence in Nicaragua heighten risks to political stability and governability, says Fitch Ratings. Continued political unrest could undermine investment conditions and economic growth as well as elevate risks of confidence shocks to the financial system and macro stability.
Fitch Ratings is warning that the growing INSS deficit in Nicaragua and the failure of the reform which would have raised contributions of workers and employers, will increase the need for government financing, at about 0.6% of GDP per year.
From a statement issued by Fitch Ratings:
Fitch Ratings-New York-27 April 2018: The Nicaraguan government's rollback of social security (INSS) changes amid widespread protests will lead to increased general government financing requirements and debt in 2018 and 2019, says Fitch Ratings. The INSS cash reserves previously projected to last through 2019 are depleting faster than expected. The protests and violence over INSS changes also underscore political risks from an increasingly centralized policy-making process reflected in Nicaragua's weak governance indicators.
The lower house of the US Congress has approved the law known as the Nicaraguan Investment Conditionality Act or Nica Act, which proposes placing conditions on loans granted by international institutions to the government of Daniel Ortega.
The Nica Act, promoted by two US congressmen to limit investment and international financing in Nicaragua, was again seen by the lower house, which unanimously approved it. Now the bill will pass to the Senate, but in order to become effective, it must pass through three more proceedings.
The US government has highlighted tax incentives and public-private sector dialogue, but warns that deficiencies in the rule of law, and extensive executive control can create significant challenges for those doing business in the country, particularly smaller foreign investors.
From the executive summary of the report "Investment Climate in Nicaragua 2017" by the US State Department:
According to Fitch Ratings the reelection of Daniel Ortega as president of Nicaragua means stability in the country's economic policies.
EDITORIAL
Stability and economic and political continuity is what Fitch Ratings envisages for Nicaragua after the outcome of the presidential elections last Sunday, in which President Daniel Ortega was declared the winner, with 70% of the vote, according to a report by the Supreme Electoral Council.
The vast majority of nicaraguans intend to vote for the re-election of the current President, Daniel Ortega, which would ensure the continuity of the current policies used to run the country.
EDITORIAL
Confirming what has been published by other pollsters,M & R Consultoresnotes that the results of its seventh national survey put the clear favorite to win the presidential election as Daniel Ortega and his wife Rosario Murillo, who accordingtothis survey now have 66.3% of the vote. The nearest contender has only 8% of the vote, while the so-called hidden vote is 20.6%.
Less investment, depletion of international reserves and contraction of public spending, in the opinion of Funides, are some of the effects that might be felt if the US Senate approves the bill.
The Nicaraguan Foundation for Economic and Social Development (Funides) has analyzed the potential impact of a possible US approval of the bill known as the "Nica Act", which aims to place conditions on the granting of loans by international institutions to the Ortega administration.
The US Congress passed a law which puts conditions on Daniel Ortega's government for obtaining loans from international institutions.
The purpose of the law known as the Nica Act, is for loans negotiated between Nicaragua and international financial organizations to be rejected by the United States, unless the Ortega government takes"...
The Canadian company Union Oil & Gas Group has announced that an agreement signed with the Ortega administration will allow them to carry out exploration works in the Sandino Basin in the Pacific.
This agreement is added to the four signed in June last year with Statoil for exploration and extraction works in a total area of 16 thousand square kilometers, also in the Pacific.
The ban on cutting, using, and selling forest resources has been extended for ten more years, with the exception of pine trees.
A decree branded as "confusing"by industry representatives, extends the logging ban in the country until 2026, for the species set out in Article 1 of Law No. 585.
The Japanese International Cooperation Agency will provide the funds to build a public hospital in Nueva Guinea this year, so that it will be operational in early 2019.
The Government of Nicaragua has signed an agreement with the Japanese International Cooperation Agency (JICA) to build a hospital department for the South Caribbean Autonomous Region in the municipality of Nueva Guinea (280 kilometers from Managua).