Title: S&P Global Raises Credit Rating for El Salvador.

Standard & Poor’s Global Rating Agency has increased El Salvador’s credit rating. According to S&P Global Ratings, the long-term rating of CCC+ reflects the country’s dependence on favorable trade, financial, and economic conditions to meet its financial commitments.

In a recent announcement, Standard & Poor’s (S&P Global Ratings) upgraded El Salvador’s long-term and short-term sovereign credit ratings to CCC+/C, stating that the long-term rating outlook is stable.

“We also affirm our long-term issue ratings of CCC+. The transfer and convertibility assessment remains AAA,” the firm stated.

The rating agency explained in its analysis that El Salvador achieved this credit rating upgrade thanks to the successful execution of a pension debt swap on April 28.

“As the new instruments under the swap have already been delivered to the pension funds, we now consider the troubled swap cured,” noted S&P Global Ratings.

The firm detailed that the decision to assign a long-term rating of CCC+ reflects the country’s dependence on favorable trade, financial, and economic conditions to meet its financial commitments.

“While these commitments appear unsustainable in the long term, we do not expect any defaults in the next 12 years,” the firm cautioned. S&P Global Ratings joined Fitch Ratings and J.P. Morgan & Chase Co. in positively rating El Salvador this week.

S&P Global Ratings also mentioned that financing needs have decreased due to better-than-expected fiscal results in 2022, the pension debt swap, and two debt repurchases (bonds) last year.

“The pension debt swap will provide relief in terms of capital and interest payments on the pension debt over the next four years, with estimated savings of around $500 million per year during that period. On the other hand, the two partial eurobond repurchases last year have significantly reduced the upcoming bullet bond amortization to $348 million from $800 million, with maturity in January 2025,” explained S&P Global Ratings.

El Salvador’s rating was upgraded to CCC+/C from “SD,” which is assigned when S&P Global Ratings considers it a default in relation to a specific issuance or class of obligations but believes the issuer will continue honoring other issuances or classes of obligations within the established deadlines.

“We would upgrade the ratings over the next six to 18 months if comprehensive policies lead to a combination of improved debt management, continued economic recovery, and greater clarity on fiscal policies, which would in turn reduce the medium-term financing gap and reinforce the country’s payment culture,” the firm stated.

In the past week, the Government of El Salvador has received positive economic news that suggests a promising outlook for public finance management and bond issuance in the coming years, considering the challenges posed by the pandemic, global crisis, and inflation, yet the country has remained committed to honoring its debt obligations.

For example, on Tuesday, J.P. Morgan & Chase Co., the largest bank in the United States, responded to the improved risk rating for El Salvador by Fitch Ratings, which upgraded the country’s credit rating from CC to CCC+, as announced last week. J.P. Morgan stated that Fitch’s upgrade recognized El Salvador’s rapid improvement in fiscal accounts over the past two years and the timely payment of global bond repayments in early 2023.

Indeed, the previous week, credit rating agency Fitch Ratings raised El Salvador’s credit rating by three notches, from CC, as stated in their February 2023 report, to CCC+, after starting from RD (restricted default).

According to the analysis behind this rating upgrade, El Salvador now falls among countries at low risk of default. The rating agency highlighted that the improvement in the risk scale is attributed to the timely payment, along with interest, of the 2023 bond, with which Nayib Bukele’s government successfully honored its debt on January 23 of this year, one day ahead of its maturity date.

According to Fitch Ratings, “another default event no longer appears likely, but it remains a real possibility given the compromised repayment capacity.”

These positive developments in El Salvador’s credit ratings reflect the government’s efforts to strengthen its financial position and regain investor confidence. The successful execution of the pension debt swap, along with improved fiscal performance and debt management, has played a significant role in boosting the country’s creditworthiness.

The upgraded credit ratings are expected to have several benefits for El Salvador. Firstly, it will enhance the country’s access to international capital markets, allowing it to secure funding at more favorable interest rates. This, in turn, can support investments in key sectors and stimulate economic growth.

Moreover, the improved credit ratings will help attract foreign investment and promote confidence among domestic investors. A higher credit rating signals a lower risk of default, making El Salvador an attractive destination for businesses and investors seeking stable returns.

The government of El Salvador has been implementing comprehensive policies aimed at fostering economic growth and strengthening fiscal discipline. These measures include structural reforms, increased transparency, and a focus on social development programs to uplift vulnerable communities.

However, challenges remain on the path to sustained economic recovery. El Salvador must continue its efforts to diversify its economy, reduce dependency on external factors, and address structural issues to ensure long-term stability.

The positive assessment from international rating agencies and financial institutions underscores the progress made by El Salvador in its economic transformation journey. It serves as an encouragement for the government and the people to continue pursuing responsible economic policies and reforms.

With a stable outlook and improved credit ratings, El Salvador is well-positioned to navigate future economic challenges and capitalize on opportunities for growth. The government’s commitment to prudent financial management and sustainable development will be crucial in realizing the country’s full potential.

As El Salvador moves forward, it is essential to maintain the momentum of positive reforms, foster an enabling business environment, and prioritize investments in infrastructure, education, and innovation. By doing so, the country can create a resilient economy that benefits all its citizens and contributes to regional prosperity.

The recent credit rating upgrades are a testament to El Salvador’s determination to overcome adversity and build a stronger and more prosperous future. As the nation continues on its path of economic recovery, the world will be watching its progress with anticipation, recognizing the potential for sustained growth and stability in this dynamic Central American nation.