After the multi-sector dialogue in Costa Rica was concluded, the main risk qualifiers agree that because the agreements signed to reduce the deficit are not enough, the government should execute its fiscal policies in a timely manner.
Although Costa Rica's fiscal situation was already precarious before the health and economic crisis that led to the covid-19 outbreak began, the scenario started to worsen since March of this year.
After the Alvarado administration agreed to backtrack on the proposal to negotiate a $1.75 billion loan with the IMF, it is predicted that next year the government will depend on domestic debt to finance its expenditures.
Standard & Poor's downgraded the foreign debt rating from B+ to B with a negative outlook, arguing that there is uncertainty due to the lack of flexibility of the Alvarado administration in implementing fiscal policy in the country.
The negative perspective in the new risk note, anticipates that there is a possibility that in the next 12 months the rating will be degraded again, if the authorities adopt policies that damage the country's financial profile.
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 and Poor's announced that it downgraded Costa Rican bonds from BB- to B+, adding to Moody's downgrade in early December.
Standard and Poor's (S&P) reported that the decision was made because the country's fiscal situation could generate a continuous increase in the general government's net debt burden.
“If the recent tax reform is not effectively implemented, and if additional fiscal measures are implemented if necessary, a continuous increase in the net debt burden of the general government could be generated, which will contribute to higher interest expenditures," explains the S&P report."
Arguing a moderate fiscal deficit, low level of public debt and an improvement in the country's external position, Standard & Poor´s kept the country's credit risk rating at BB-.
From the press release of the Banco de Guatemala:
October 31, 2018. The risk rating agency Standard & Poor’s (S&P) confirmed the rating of credit risk for Guatemala in BB- and maintained the stable outlook on Monday, October 29th.
In the view of Moody's, Fitch and S & P, the latest projections of public debt and fiscal deficit by the Central Bank of Costa Rica, further worsen the outlook for the debt rating.
Last week the Central Bank of Costa Rica (BCCR) released a report in which it explained that for this year it is expected that the public debt with respect to the Gross Domestic Product (GDP) will reach 53.8%, and by 2019 this indicator will reach 58.4%.
S & P has improved Panama's outlook from stable to positive, re-affirming its BBB risk rating based on factors such as "high and consistent economic growth and a stable fiscal policy".
The rating granted by Standard & Poor's recognized "... the progress made by Panama in recent years for the automatic exchange of tax information with 33 countries and changes in legal regulations to improve transparency in the financial system."
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".
More expensive external credit, deterioration of the country's image, and higher local interest rates are just some of the consequences that could result from the non-payment of $55 million to pension funds.
The decision taken by the Sánchez Cerén administration not to pay interest to pension funds on the grounds of lack of support from the opposition political party has caused not only a down grading of the debt rating by agencies such as Fitch Ratings and Standard & Poor's, but has also led the business sector to raise its voice about the seriousness of the situation and to warn about possible consequences on economic activity.
Standard & Poor's cites persistent difficulties in approving a fiscal reform in the short term, given the political fragmentation that exists in the Legislature.
Analyst Joydeep Mukherji said "... two previous governments have tried to make a fiscal reform and failed and that the government of Luis Guillermo Solis has had difficultyconvincing the Legislative Assembly ...".
Confirmation of the decline in the financial capacity of the construction company has strengthened arguments by those calling for the revision of their contracts and that the firm not be awarded others.
From a statement issued by Standard & Poor's:
SAO PAULO (Standard & Poor's) March 29, 2016--Standard & Poor's Ratings Services lowered its global scale corporate credit rating on Odebrecht Engenharia e Construção S.A.
The sovereign rating B + with stable outlook is based on the "economic performance, low debt burden of the government, political stability and partnership between government and the private sector through dialogue".
From a statement issued by the Central Bank of Nicaragua:
The Republic of Nicaragua has low per capita income, monetary policy rigidities, and vulnerability to external shocks.
"... The political scene continues to block structural reforms that would create a platform for more private investment and higher economic growth."
From a statement issued by the Presidency of El Salvador:
The rating agency Standard & Poor's has raised its growth forecasts for El Salvador to 2.6% for the period 2016-2018 in its latest analysis of the Salvadoran economy, in which it also reaffirmed the strength in the country's debt payment allowing it to maintain a stable rating of B + B.
According to Standard & Poor's, the increase in transactions of covered bonds is strengthening financial markets in the region.
From an article by Standard & Poor's:
"Central America: New Transactions Could Bolster Performance"
"Panama's dormant yet sophisticated residential mortgage market witnessed some activity in 2013. After more than two years since the last placement, a new RMBS transaction was placed in the local market in 2013 for US$45 million, with the underlying collateral comprising residential mortgage loans in El Salvador. Historically, most securitizations have been locally placed, with just a few cross-border transactions.
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