Venezuela, Argentina and Ecuador, which Also Lost investment Grade
Colombia, which recently lost investment grade at Standard & Poor‘s, joins the list of Latin American countries with a low grade
The economic crisis unleashed by the covid-19 pandemic, plus the internal problems of each country, have generated a collapse in the fiscal and credit health of many nations, especially emerging countries such as those in the region.
Standard & Poor’s downgraded Colombia to BB + and removed its investment grade
One way to confirm this is in light of the ratings of credit rating agencies that have been changing their credit prospects. For example, today the economic news of the region has to do with the fall of Kolombiya in Standard & Poor‘s, which lowered its rating to BB + and removed the investment grade from the country. In the case of Moody’s, the rating is at Baa2, while Fitch Ratings maintains it at BBB-.
It is largely due to the low expectation of economic recovery that the country has for this year, the withdrawal of the fiscal reform, the absence of a new one, and the public order situation that Colombia is currently facing.
But the country is not the only one in the region that is at this level. The highest risk rate in the area is that of Venezuela, which registered 24,496 points, followed by Argentina with 1,444 basis points; Ecuador with 1,242; and to a lesser extent there is Bolivia with 485 points and Brazil with 281.
On the side of Venezuela, the country with the highest investment risk in Latin America, it is rated by agencies such as Moody’s, S&P and Fitch at C, B + and WD, respectively. Currently the neighboring country is seen as unviable both for investing and for generating public credit due to its current economic and political crisis.
On the Argentina side, Moody’s has it as CA, S&P at B + and Fitch Ratings at CCC. The latter reflects deep liquidity and debt sustainability challenges that continue to impede improvement in sovereign repayment capacity, including an economic recession that has been greatly exacerbated by the COVID-19 pandemic.
Ecuador has Caa3 on Moody’s, B- on S&P and B- on Fitch. Fitch’s reflected the completion of a “distressed debt swap” that according to the agency appears to have healed the moratorium event initiated by the “consent request” in April 2020. Although, with a stable outlook, “is restricted by the liquidity and debt sustainability risks that persist despite the relief offered by the debt deal, Fitch said last year when it raised the country’s rating.
In Bolivia, since 2020, on two occasions, Moody’s has downgraded Bolivia from Ba3 (contains speculative elements and is subject to substantial credit risk) to B2, a variation that is not due to the economic crisis caused by covid-19, but rather to continuous fiscal and balance of payments deficits that led to a deterioration in public accounts and international reserves. While the rating agencies S&P has it at B- and Fitch at B.
It should be noted that there are 50 credit rating agencies in the world and the three that dominate the market due to having a greater number of rated countries are Standard & Poor’s (128); Fitch (125) and Moody’s (109 countries).
The rating agencies, in general, to issue their score, evaluate the probability of payment: capacity and intention of the issuer to meet its financial commitments; the protection offered by the obligation in the event of bankruptcy and other events that may affect the creditor’s rights.
Other countries in the region that are currently without investment grade are Guatemala, Costa Rica, Paraguay, and Panama.