For Fitch, the delay in vaccination campaigns constitutes a latent risk of a prolonged pandemic, which would delay the recovery of the region's economies and would cause negative pressures on the risk ratings to be issued in the coming months.
Fitch Ratings issued a bulletin for Mexico, Central America and the Caribbean on May 25, in which it warned that given the deep economic contractions in the region and the moderate recovery outlook, there are threats of negative rating pressures.
Moody's maintained the Salvadoran government's long-term and senior unsecured issuer rating at B3, but decided to change the outlook to negative, a downgrade that reflects persistent concerns about public debt sustainability.
The negative outlook reflects the credit risks associated with the implementation risks of its upcoming fiscal adjustment efforts, high liquidity risks driven by large gross financing needs in 2021-23, and persistent concerns about debt sustainability despite an expected fiscal adjustment, the rating agency explained.
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 kept the country's debt rating at B3, but decided to change the outlook from stable to positive, arguing that the government's liquidity risks have been substantially reduced.
The affirmation of El Salvador's B3 sovereign ratings reflects high public debt ratios and a growing interest burden, the rating agency said.
Because the Debt/GDP ratio increased from 69.4% to 70.7% between 2018 and 2019, Fitch forecasts that, in the absence of additional fiscal adjustment, the debt burden will continue to grow in the coming years.
A political stalemate leading to the failure of the 2020 budget proposal and the approval of the necessary external financing could lead to pressure on El Salvador's rating (B- / Stable), informed the risk rating agency.
After the country issued $1.097 million in Eurobonds for a 30-year term, Moody's gave them a "B3" rating, while Fitch Ratings assigned them a "B".
Fitch Ratings has assigned a 'B-' rating to El Salvador's $1.097 million notes due January 2050. The notes have a coupon of 7.1246%, the agency said.
The Fitch statement dated July 31 adds that "... The proceeds from the issue will be used in accordance with local laws for general budgetary purposes, including the redemption of bonds maturing this year. The rating of the bonds is aligned with El Salvador's long-term foreign currency issuer default rating (IDR) of 'B-' with a stable outlook."
"The 'B-' rating reflects the recent history of local currency defaults, as well as the political uncertainties influencing congressional approval of key economic reform measures."
This is the second consecutive year that the agency decided not to change the country's rating, as Fitch Ratings reported a year ago that it had decided to maintain the rating of foreign currency debt at "B-", and on that occasion argued that political tensions made it difficult to reach agreements on government financing.
The rating agency decided to keep the debt rating at B3 with a stable outlook, arguing that the country's tax burden is high, but stable.
The last rating variation was made in February 2018, when it was reported that at that time the political agreement reached to approve the resources to pay pension funds and the reduction in liquidity risk based the decision of the rating agency to raise the score from Caa1 to B3.
The latest risk ratings for the issuance of long-term debt of Central American economies identify Panama as the most attractive country to invest in.
On March 8, Moody's decided to raise its long-term issuer rating in foreign currency from Baa2 to Baa1, arguing that the outlook remains more favorable in the medium term.
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+.
Standard & Poors raised the rating from CCC+/C to B-/B, with a stable outlook, arguing that in the next three years the fiscal deficit will be moderate, and its debt levels will remain unchanged.
From the Standard & Poors report:
RATINGS
Foreign Currency: B-/Stable/B
Local Currency: B-/Stable/B
For further details see Ratings List.
Fitch Ratings has kept the debt rating in foreign currency at "B-", arguing that political tension has been reduced following the pension reform approved in October last year and the budget passed in January of this year.
Fitch Ratings-New York-13 June 2018: Fitch Ratings has affirmed El Salvador's long-term, foreign-currency Issuer Default Rating (IDR) at 'B-' with a Stable Outlook.
The key factor driving the rating upgrade is the significant reduction of the government liquidity risks, as political agreements have led to Congress´approval of long-term government financing and pension reform.
Risk rating firm Moody's announced on Friday, February 23 that El Salvador's debt was rated B3, which represents an improvement from the previous rating of Caa1.However, the country is still considered an issuer with risk of not fulfilling its obligations.
One day after reducing the debt rating to Selective Default, Standard & Poors has now raised it to CCC, after the government completed debt restructuring.
S & P Global Ratings (formerly Standard and Poor's) yesterday upgraded El Salvador's sovereign risk rating to "CCC +" after declaring the country in default because it considered the restructuring of the pension debt to be a de facto operation. See: "El Salvador in selective default".
Standard & Poor's has lowered its debt rating to SD after the Legislative Assembly approved a pension reform which includes a restructuring of government debt.
From a statement issued by Standard & Poor´s:
El Salvador's Congress approved amendments to the terms of its Certificates for Pension Investments (CIPs).
Based on our criteria, we consider this change in the original terms to be a default.