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As a result of the corruption case in Costa Rica involving a shareholder of Constructora MECO, Fitch Ratings downgraded the company's long-term national rating to "A-(pan)" from "AA-(pan)", and at the same time placed it on Negative Watch.
On the morning of June 14, 2021, some 700 agents of the Judicial Investigation Agency (OIJ) and the Public Prosecutor's Office (prosecutors) raided 21 homes, Casa Presidencial, Ministry of Public Works and Transportation (MOPT), National Viability Council (Conavi) and Public Transportation Council (CTP).
The rating agency affirmed the Central American Country’s Long-Term Foreign Currency Issuer Default rating at "B-" and reviewed the rating outlook to stable from negative.
Nicaragua's ratings are constrained by the lowest average World Bank Governance Indicators score in the Americas rated by Fitch, low per capita income, political stability risks, and international sanctions that limit future external financing, the rating agency's analysis highlights.
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.
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 rating agency decided to keep the long-term issuer's note at B2, but changed the risk outlook from stable to negative, arguing that there are greater risks to the country's financing due to increased borrowing requirements.
The affirmation of Costa Rica's B2 rating takes into account the sovereign's levels of wealth above its peers and its dynamic economy.
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 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.
For Moody's, the Costa Rican government's response to the Covid-19 crisis will put negative pressure on the country's fiscal profile.
According to the rating agency's analysis, the measures include a three-month moratorium on tax payments, a gradual reduction in corporate social benefit contributions and extended credit lines for the companies most affected by the economic recession.
Arguing that economic strength has weakened as a result of social tensions and is likely to leave a lasting negative impact, the rating agency reduced the country's credit risk rating from B2 to B3.
"The risk of reduced access to official external credit is creating financing challenges and restricting the authorities' ability to support economic activity," the agency's report explains.
Arguing that the high fiscal deficit is still on an upward trend, the rating agency downgraded the long-term and senior unsecured government bond issuer's note from B1 to B2.
Fiscal deficits averaging more than 6% of GDP since 2015 have led to higher public debt/GDP than its 'B'-rated peers, the rating agency said.
From Moody's statement:
New York, February 10, 2020. Moody's Investors Service, ("Moody's") has today downgraded the Government of Costa Rica's long-term issuer and senior unsecured bond ratings to B2 from B1 and changed its rating outlook to stable from negative.
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.
Arguing that continuity in economic policies is expected after the change of administration in January 2020, Standard & Poor's maintained the country's credit risk rating at BB-.
From S&P report:
S&P Global Ratings confirmed its long-term sovereign credit ratings of "BB-" in long-term foreign currency and "BB" in Guatemala. The outlook for our long-term ratings remains stable.
Fitch Ratings decided to keep the country's risk rating at B, but changed the outlook from negative to stable, arguing that there are some signs of stabilization of Central Bank reserves and commercial bank deposits.
The revision of the outlook reflects the stabilization of central bank reserves and commercial bank deposits, a significant fiscal adjustment and social security reform that have reduced domestic financing needs and a pronounced external rebalancing that has facilitated the external financing requirement, the rating agency reported.