Friday, February 28, 2014

Moody's Cuts Honduras Credit Again

Moody's Investor Service cut Honduras's credit rating from B2 to B3 today.

Honduras now has a rating equal to that of the Congo and Argentina.

The reason: the widening fiscal deficit of the Honduran government.  Moody's places Honduras's credit rating as tied for the worst rating in Central America:
Costa Rica     Baa3
Panama         Baa2
Nicaragua      B3
El Salvador    Ba3
Honduras       B3
Guatemala     Ba1

Moody's describes Baa as a low risk investment, Ba as a somewhat risky investment, and B as a risky investment.

Porfirio Lobo Sosa was supposed to get the government budget under control in 2013, but he didn't.  Instead, he let it balloon out of control, and the deficit went from 5.9% of Honduras's gross domestic product to 7.7 % of the GDP.

This news comes as Juan Orlando Hernandez celebrates his first 30 days in power, and amid reports that in general, investors are counting on him to turn the fiscal deficits around.

They just don't believe Honduras will achieve the goals his administration has set.

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