S&P has upgraded Guatemala’s credit rating to ‘BB’ from ‘BB-‘ with a stable outlook, saying the Central American country has a “resilient” economy and macroeconomic management will be “cautious” over the next year and a half.

According to the rating agency, neither the elections that will take place at the end of June nor the unfavorable global conditions will have an impact on the Guatemalan economy, which will maintain a low fiscal deficit and stable debt dynamics.

However, the country needs to take additional measures to promote long-term growth and address high social needs or reduce high levels of poverty. In this sense, political fragmentation and the weakness of public institutions are an obstacle to developing structural reforms.

The International Monetary Fund (IMF) recently made a statement along the same lines during its visit to the country to prepare Article IV. The agency pointed out that Guatemala shows signs of “strength” in its economic evolution, but encouraged the authorities to “intensify” the approval of reforms that look at the medium term to achieve development goals.

On the other hand, Guatemala’s solid external position should continue to be a rating strength in the coming years, with a current account that has posted surpluses for the past seven years. Modest public debt or “solid” monetary policy are also credit strengths for S&P.

Regarding the banking sector, Guatemala’s financial system is “resilient” to shocks and shows strong capitalization, liquidity and profitability indices.

Growth and political tension

A worse than expected economic performance or unexpected political tensions before, after and during the elections could be sufficient reasons for the rating agency to reduce Guatemala’s solvency note.

“Such events could undermine Guatemala’s long-term Gross Domestic Product (GDP) growth trajectory,” the S&P statement said. The country is expected to grow 3 % in 2023.

Conversely, the rating could be raised if political and economic performance increases investor confidence in the country, which would result in higher-than-expected growth. In addition, the strength of the rule of law or the improvement of the regulatory and legal framework would also encourage the agency to increase the note.

Source: dpa

(Reference image source: Guatemalan Tourism Institute, Europa Press)

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La entrada S&P upgrades Guatemala’s rating to ‘BB’ with stable outlook apareció primero en Bitfinance.

This Monday, China’s offer to buy the debt of El Salvador, a pro-cryptocurrency Central American country, was announced as a measure to help refinance its external obligations.

The vice president of El Salvador, Félix Ulloa, said this week that China offered to buy the debt and thus prevent it from falling into default. It is important to note that according to Moody’s, S&P and Fitch Ratings, the nation “currently has the lowest risk rating in Central America.”

Ulloa told Bloomberg during an event in Madrid, Spain, that the Asian country made the offer to buy his country’s debt, which currently has a CCC+ rating from S&P Global Ratings. This is seven notches below investment grade.

The main reason for this strategy launched by Xi Jinping would be to help El Salvador avoid falling into default, taking into account that it currently has 670 million dollars in bonds maturing on January 24.

El Salvador is at a crossroads. Even if it can avoid a sovereign default in 2023, “in our baseline, the reserves would disappear if the government paid the redemption of the 2025 eurobonds,” Oxford Economics analysts Felipe Camargo and Lucila Bonilla noted in an October note.

M.Pino

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Source: elfinanciero

La entrada China offers to buy El Salvador’s debt apareció primero en Bitfinance.