Willing But Unable: Default Risk On The Rise

Latin America's sovereign creditworthiness has taken a severe hit since our last sovereign risk ratings update on the region, following a series of downgrades to our core economic forecasts. The picture had already started to look precarious for some countries back in January, as fiscal shortfalls and declining reserve levels undermined the 'ability to pay' components in our ratings (see 'After Ecuador: Who's Next?' on January 30 in our online service). This time around, though, recent downward adjustments to our economic growth and fiscal projections have seen the region's average 'ability to pay' score fall drastically from 23.8 to 18.3. To put this into perspective, at the beginning of the year the number of countries in Latin America rated 'E' rose from one to five. The number has now doubled to ten.

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