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TEXT-S&P: 'BB' category sovereigns in South and Central america

Mon Jun 11, 2012 9:58pm IST

June 11 - Six sovereigns in Latin America have 'BB' category ratings, which

on the surface might imply that the countries are similar in many respects--from

their economies to their political systems--said Standard & Poor's Ratings

Services in a report titled "A Comparative Look At 'BB' Category Sovereigns In

South And Central America".

The reality, it turns out, is that even though the six share some

characteristics, there are also many differences between them.

"Our report highlights the complex interplay of factors that can land

distinctly different sovereigns in the same rating category and illustrates

how the vicissitudes of the global economy can support or constrain a

sovereign's rating," said Standard & Poor's credit analyst Olga Kalinina.

The three South American countries--Bolivia, Paraguay, and Suriname--have

benefited greatly from high world prices for their primary commodities:

natural gas, soya, and gold. Combined with rising industrial production, this

has boosted their economies, and, in the case of Bolivia and Suriname,

government revenues as well.

By contrast, the three less commodity-rich sovereigns in Central America were

hurt more by the global recession and have recovered from it slowly. Costa

Rica's, El Salvador's, and Guatemala's public finances, which were already

weak, have worsened as their budget deficits have widened and their government

debts climbed. Nevertheless, these three countries have maintained relatively

stronger public institutions and continued pursuing predictable and

market-oriented policies. This has partially offset their economic

vulnerabilities.

Bottom line, the two sets of countries seem to be moving along opposite

trajectories. On balance, creditworthiness is improving in Bolivia, Paraguay,

and Suriname--we've upgraded all three to the 'BB' category from 'B' in the

past two years, as their governments have proven able to cash in on the

favorable commodities cycle.

The Central American sovereigns, by contrast, are facing rising credit risks.

We have a negative outlook on our 'BB' rating on Guatemala, and we have

downgraded El Salvador by two rating notches over the past three years. These

countries are trying to stave off rising credit risks.

The report is available to subscribers of RatingsDirect on the Global Credit

Portal at www.globalcreditportal.com. If you are not a RatingsDirect

subscriber, you may purchase a copy of the report by calling (1) 212-438-7280

or sending an e-mail to research_request@standardandpoors.com. Ratings

information can also be found on Standard & Poor's public Web site by using

the Ratings search box located in the left column at www.standardandpoors.com.

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