The country risk rating agency Moody’s Investors Service maintained Guatemala’s rating at Ba1 and keeps perspective stablewhich is stated in a public statement released this followingnoon, following the assessment carried out during a visit by its representatives a month ago.
“Moody’s Ratings (Moody’s) today affirmed the long-term foreign and local currency issuer ratings of the Government of Guatemala at Ba1 and maintained the stable outlook. Moody’s has also affirmed the ratings of Guatemala’s senior unsecured foreign currency debt at Ba1,” it said.
With this note, the three international agencies (Moody’s, Fitch Ratings and S&P Global Ratings) confirmed their evaluation cycle for Guatemala, in the context of the arrival of new government authorities. The note released tonight means that this is how Moody’s sees Guatemala for the next 12 months; that is, in a stable condition.
Juan Carlos Zapata, executive director of the Foundation for the Development of Guatemala (Fundesa), said that this rating highlights Guatemala’s macroeconomic stability and low credit risk.
However, to achieve a better rating and eventually advance towards Investment Grade, it would be necessary to strengthen institutional capacity, especially by increasing public investment and the country’s infrastructure.
What does it mean
The document notes that the confirmation of the Ba1 rating reflects Guatemala’s track record of stable economic growth despite low per capita income and comparatively weak infrastructure and social development indicators; a track record of prudent fiscal management associated with low and stable public debt metrics; albeit with limited external vulnerabilities, which is supported by significant remittance inflows.
It also reflects long-standing institutional challenges and political risk as the main driver of potential risks. “The stable outlook reflects the government’s efforts in anti-corruption, transparency and social reform, as well as the focus on public investment to address the economy’s infrastructure deficit, balanced with a challenging reform negotiation process in parliament that underpins continued risk of political events,” the document states.
It also explains that “Guatemala’s local and foreign currency caps remain unchanged. Namely, the local currency cap at Baa1, three notches higher than the sovereign rating, reflects limited government intervention in the economy and limited external imbalances. The foreign currency cap at Baa3, two notches below the LC cap, reflects the comparatively high, though improving, CF loan-to-deposit ratio of over 100% in Guatemala’s banking system, compared to regional peers.”
Country Notes
According to the Public Credit Directorate of the Ministry of Public Finance (Minfin), these were the notes for Guatemala as of May 31, 2024:
- Standar and Poor´s: BB/Positiva/B
- Moody’s: Ba1/Stable
- Fitch: BB/Estable
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