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LatinNews Daily - 03 August 2021

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In brief: Moody’s downgrades El Salvador

* International credit ratings agency Moody’s Investors Service has downgraded El Salvador’s long-term foreign-currency issuer and senior unsecured ratings from 'B3' to 'Caa1'. The outlook remains 'negative'. Moody’s decision to downgrade reflects its view that El Salvador remains fiscally vulnerable, with two key factors behind the downgrade: the fact that El Salvador’s access to financial markets is likely to remain constrained ahead of debt repayments falling in 2023, and “a deterioration in the quality of policymaking that has intensified implementation risks to the authorities’ fiscal adjustment plans and increased uncertainty about financing prospects”. Moody’s further explains that although El Salvador’s authorities have shown willingness to achieve fiscal consolidation, this is in question due to liquidity pressures likely to arise from limited access to funding and uncertainty surrounding fresh financing from the International Monetary Fund.