El Salvador hits skids

Only days after Hurricane Ida ripped through El Salvador, costing nearly 200 lives and hundreds of millions of dollars in infrastructural damage, Moody's Investors Service this week downgraded El Salvador's sovereign rating to "Ba1" from "Baa3." According to Reuters this elimates El Salvador's "investment grade rating" to "junk bond" and "places the country on a negative outlook."

I don't know all the calculations that factor into such decisions, nor the ultimate macroeconomic implications, but I know that they are not made lightly, and I know that the imaginable consequences for the political economy of El Salvador today are not promising. El Salvador had managed to stay afloat in the global financial crisis and a poltically unstable region (most of its neihbors have horrible debt as well) even as its first presidential transition to a new party in nearly 20 years begins to take root, these two major shocks do not augur well for the Funes government's ability to govern in an already cash-strapped and politically fractious envrionment.

Sources: Reuters, Bloomberg, El Diario de Hoy