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Fitch: LatAm Elections Could Impact Reform Prospects, with Possible Rating Implications
June 13, 2017 / 4:02 PM / 6 months ago

Fitch: LatAm Elections Could Impact Reform Prospects, with Possible Rating Implications

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Latin American Election Cycle and Rating Implications here NEW YORK, June 13 (Fitch) The results of Latin America's heavy election cycle over the next year and a half could have varied rating implications, with fiscal consolidation being a key challenge as new governments face low economic growth and reduced revenues, especially related to commodities, making it even more difficult to stem adverse debt dynamics, according to a new special report by Fitch Ratings. Presidential elections are scheduled in seven countries (Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay and Venezuela), with term limits in all countries except for one (Venezuela) leading to new presidents. In addition, there will be important congressional elections in Argentina, which will test the Macri administration's reform agenda, and El Salvador, where months of political gridlock have led to dwindling government financing options and a debt default. Elections will be particularly important for rating dynamics in countries with a Negative Rating Outlook, such as Chile, Brazil and Mexico. Chile's low economic growth environment and higher fiscal deficits have led its debt burden to double over the past five years. In Brazil, a series of corruption scandals have engulfed the political establishment and increased political uncertainty and could lead to greater contentiousness in the next elections. Strong political leadership will be required in order to continue to pass reforms that improve the outlook for growth and public finances. In Mexico, sluggish economic growth, and institutional weaknesses such as the high incidence of crime and the perception of increased corruption have reduced President Pena Nieto's popularity. Upcoming NAFTA negotiations are also influencing the political uncertainty. The elections are important to Costa Rica and El Salvador as well to see if they help in breaking the political deadlock that has led to negative rating movements over the last six months. Fiscal reform measures are pending, with possible ratings implications in both countries. In addition, the next government of El Salvador will likely inherit a weak economy. In Venezuela, where economic and political dynamics have been extremely challenging, presidential elections are currently scheduled for December 2018. The government has called for a Constituent Assembly, which could alter the election schedule, while the opposition is seeking a change in government. The situation remains very fluid. A new government could lead to policy changes aimed at eliminating severe economic distortions, but the probability of default remains high. While Colombia's Rating Outlook is Stable, fiscal consolidation will be challenged by low growth and the implementation of the peace agreement with the FARC. Fitch expects the transition of power following the elections to be smooth in all countries, with the possible exception of Venezuela. Elections themselves do not directly impact ratings unless accompanied by marked shifts in policies. Fitch will continue to monitor how economic policies and performance evolve following the elections. A marked policy shift away from market-friendly policies could weigh on the credit profiles of Argentina, Brazil and Mexico. An end to political gridlock in Costa Rica or El Salvador, on the other hand, could support their credit profiles. The next administrations in both Chile and Colombia will face challenges to achieving fiscal consolidation, which will be central to those countries' rating trajectories. Contact: Richard Francis Director +1 212-908-0898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Shelly Shetty Senior Director +1 212-908-0324 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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