Wednesday, November 18, 2009

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

6 comments:

Anonymous said...

Sometimes I wonder if humanitarianism can ever really save the victims of these disasters: http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=3WVGX13QDLQ2&preview=article&linkid=f9aa8787-51da-40af-a405-04a01e8d2112&pdaffid=ZVFwBG5jk4Kvl9OaBJc5%2bg%3d%3d

Thank you for posting today :)

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Tambopaxi said...

Oh, Salvador...

Re: Moody, guess we'd have to look at the debt servicing situation of the country, but frankly, I'm a bit suspicious of Moody's timing. How is it that after 25-27 years of ARENA governance (and debt acquistion and without serious ratings issues), the FMLN comes in and is almost immediately hit with this problem?

The other thing is natural disasters in El Sal, the most densely populated country in LA. Earthquakes, floods, or whatever, the place is so crowded that there's simply no way for these poor folks to get out of the way when something happens...

Hodad said...

Moody's who the f... are they, more jewsih arrogant greedy bankers lackey's"
ha, ask me

El Salvador, NOW is the time to invest here, in agricultural aspects

and Tambo, yes, true, shame but nature is, well nature
no person or group can be blamed for this, as ARENAZI is trying against Frente
idiotico

here is the place to be, South of Mexico

Hodad said...

Moody's who the f... are they, more jewsih arrogant greedy banker's lackey's?l
ha, ask me

El Salvador, NOW is the time to invest here, in agricultural aspects

and Tambo, yes, true, shame but nature is, well nature
no person or group can be blamed for this, as ARENAZI is trying against Frente
idiotico

here is the place to be, South of Mexico

Anonymous said...

Thanks for bringing your antisemitic ignorance to the comments section -- twice, no less.

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