Thursday, 18 May 2023 03:38

El Salvador's country risk improved, dropping 24 points between july 2022 and may 2023

Written by Evelyn Alas

El Salvador significantly improved its Emerging Bond Market Index (EMBI), dropping an average of 24 points between july 2022 and may 2023, that is, it fell from 35.12 points to 13.28 points, after salvadoran authorities sought a way to reduce the risk of default, according to a report by the Public Policy Observatory of the Universidad Francisco Gavidia (UFG).

This means that the country's authorities paid important global bond amortizations at the beginning of the year corresponding to US$800 million in Eurobonds maturing in january 2023, as well as another US$800 million for the year 2025.

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After the salvadoran nation paid off its foreign debt, the rating agency Fitch Ratings raised the country's credit rating from CC to CCC+. The agency also stated that a debt default situation no longer seems likely.

This growth has contributed both to tax collection and to the improvement of fiscal accounts in general.

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JP Morgan & Chase expects these positive trends, such as above-potential growth and fiscal receipts, to continue in the near term. They also foresee a gradual decline in debt ratios in the country.

According to the rating agency S&P Global Ratings raised the Central American country's rating from "SD/SD" to "CCC+/C", after declaring it in default.

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El Salvador has achieved a faster recovery in economic activity and, by some measures, has production above its pre-pandemic trend.

 

Translated by: A.M