LatAm Erodes Ratings Gap

Latin America has narrowed the ratings gap with other regions and the trend is likely to continue, says Moody’s. “After lagging behind other regions through most of the decade, the sovereign ratings in Latin America have strengthened, thanks to an improving macroeconomic picture, rising economic growth and a trend in favor of diminishing government debt burdens that are better managed,” says Moody’s analyst Sergio Valderrama. Seven LatAm sovereigns were upgraded this year, the most in any region in the world. Another 3 are on review for possible upgrades, indicating the likelihood of further improvements this year. However, Moody’s notes that the median sovereign rating for LatAm is Ba2, 3 notches below the median for all sovereigns it rates. Moreover, the region has the highest share of countries in the B-Caa category and the highest number of defaults since December 2000. “Even though improvements in debt numbers and economic growth vary by subregion, the upward ratings trend is undeniable and we expect it will persist at least for the near term,” says Valderrama.