BMI On Latin America Sovereign Risk
Business Monitor International (BMI) has just published its latest Sovereign Risk Ratings for Latin America. Our sovereign ratings are updated every quarter and cover 86 emerging markets worldwide. Each country gets a composite score out of 100 and a corresponding rating, which are based on the state’s ability to repay external debt and its willingness to do so. We also assign Market Outlook scores, based on our expectations for the performance of the country’s 5-year credit default swap or suitable sovereign bond.
The sovereign risk situation in Latin America is as follows:
- While our latest Sovereign Risk Ratings show no change in the average overall score for the region since our last update in October 2012, we continue to see 2013 as a challenging year for several economies.
- Our ratings highlight a number of themes which we believe will be key in 2013, such as economic underperformance in Argentina and Venezuela, the impact of slowing Chinese growth on Latin America’s industrial metals exporters, and continued robust economic expansion and fiscal consolidation in Mexico and Colombia.
- Although Chile (rated B with a score of 76/100) retained the top spot in the region, its score has declined significantly in recent months, as we expect that China’s rebalancing away from an investment-led growth model will erode Chile’s current account position significantly, weighing on the country’s ‘ability to pay’ score.
- In addition, we have seen a broader shake-up at the top of our regional rankings in recent quarters, with Brazil (C+) and Chile losing their luster, while Colombia and Mexico (both rated B, and both economies we have liked for a long time) have climbed towards the top.
- Another major theme we have long highlighted is that 2013 will be a turbulent year for Argentina and Venezuela (both rated E), which hold the bottom two spots in our regional table. In particular, Argentina now scores lowest in the region in the ‘willingness to pay’ category, which chimes well with our view that the country is highly likely to enter technical default as a result of an ongoing court case with a group of ‘hold-out’ investors.
Our full Sovereign Risk Ratings reports are available to subscribers at Business Monitor Online.
This Week’s Trivia Question
Last week’s question was about currencies. We asked, apart from the Brazilian real, what other existing currencies’ names are derived from the same root word as the real? And which currencies in the world have a value greater than one US dollar?
The answer to the first part is the rial currencies of Iran, Oman, and Yemen, the riyal currencies of Qatar and Saudi Arabia, and the Cambodian riel. The answer to the second part is the Kuwaiti dinar, Bahrain dinar, Oman rial, Latvian lat, UK pound, Jordanian dinar, the euro, Azerbaijani manat, Cayman Islands dollar, Swiss franc, and from time to time the Australian and Canadian dollars, which are currently close to parity with the US dollar.
This week’s theme is religious succession, which is currently focused on the identity of the next Pope. Our question is, which church elected its new head on March 1, 2013?