LatinNews Regional Monitor: Brazil & Southern Cone - 27 July 2018

Chile: Moody’s Investors Service, the international credit ratings agency, has downgraded Chile’s sovereign credit rating from ‘Aa3’ to ‘A1’ to reflect “a gradual but broad-based deterioration in Chile’s credit profile”. The agency stated that “despite clear indications of near-term improvements in economic and fiscal prospects”, the weakness of the Chilean government’s balance sheet and “low income levels relative to Aa-rated peers, dependence on commodities and external vulnerabilities” were the drivers behind the downgrade. The decision follows previous downgrades in 2017 by the other two principal ratings agencies, Fitch Ratings and Standard & Poor’s Global Ratings. It comes as a blow to the Sebastián Piñera government inaugurated in March 2018, and was criticised by its finance minister, Felipe Larraín, who said that Moody’s was “behind the curve” in making this decision at a time when the “Chilean economy is accelerating”. Larraín went on to state that “Chile is paying the consequences of fiscal deterioration and low growth of the past four years”. Nevertheless, Moody’s decision to improve its perspective for Chile from ‘negative’ to ‘stable’ is one possible consolation for the Piñera government

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