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Fitch Affirms Guatemala at BB- and removes Negative Watch

By Mayora IP - 18/12/2020

American credit rating agency Fitch Ratings has affirmed Guatemala's Long-Term Foreign-Currency Issuer Default Ratings (IDR) at 'BB-' and removed the Rating Watch Negative. According to the press release from the company, the affirmation of Guatemala's Foreign-Currency IDRs at 'BB-' and removal of the Rating Watch Negative reflects the government's settlement of the coupon payment on its Eurobond due 2026 ahead of the grace period which ended December 3. 

"The government has successfully reached a settlement agreement with TECO Holdings Guatemala which lifted the restraining notice on its account at the Bank of New York Mellon. Guatemala's government has fully regained its payment capacity to service external debt payments within the U.S.", Fitch Ratings stated. 

Previously, a coupon payment of USD15.75 million due Nov. 3 was delayed because its fiscal agent did not remit the payment to bondholders as a New York court received a restraining notice directed at the government's account at the Bank of New York Mellon. Earlier, a Washington D.C. court had ruled in favor of TECO and ordered the government of Guatemala to pay the company USD35.4 million for an arbitration which started in 2009.

Guatemala's IDRs are supported by a track record of prudent monetary and fiscal policies, macroeconomic stability, low public debt to GDP and sound external liquidity. These strengths are counterbalanced by a narrow tax base that constrains policy flexibility and limits debt tolerance. They are also counterbalanced by reliance on workers' remittances inflows to offset large trade deficits and weak governance, investment levels and human development indicators. Ongoing protests opposing lack of transparency of the budget approval process are related to governance concerns, particularly on control of corruption and rule of law.

By Mayora IP - 18/12/2020
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