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Report Card: Subdued Economic Growth In The Americas Constrains Sovereign Creditworthiness
Sovereign credit ratings in the Americas fall between 'AAA' and 'SD', reflecting the differing fortunes of the 30 sovereigns that Standard & Poor's Ratings Services rates in the western hemisphere.
Canada is the only sovereign in the hemisphere with a 'AAA' rating. The U.S. has the second-highest rating in the hemisphere at 'AA+', following its downgrade from 'AAA' in August of 2011. At the other end of the rating scale, we rate Grenada at 'SD', following its recent default. The risk of default as a result of a lawsuit against the Argentine government led us to lower our rating on Argentina to 'CCC+' in September of this year, signaling a high risk of default.
Different regions within the western hemisphere have shown differing credit trends in recent years. Canada and the U.S., the two wealthiest and highest-rated sovereigns in the hemisphere, have a stable outlook on their long-term ratings, reflecting the resumption of GDP growth and gradual plateauing of their debt burdens.
Credit trends have been negative in the Caribbean region, with several recent downgrades and negative outlooks. The region has suffered in recent times from a combination of weak tourism earnings, high commodity prices (as most Caribbean countries are net importers of commodities, especially of oil), and rising government debt. Jamaica undertook a debt exchange in early 2013, leading us to lower the rating to 'SD' before subsequently assigning a new rating on the restructured debt. Belize also emerged from 'SD' early this year, following its default in August of 2012. We lowered the rating on Grenada to 'SD' in March of 2013.
Similarly, Central American countries have also suffered from weak GDP growth, rising debt burdens, and deteriorating ratings. We lowered the sovereign rating on Honduras to 'B' in August of 2013, reflecting eroding fiscal flexibility and a rising debt burden. We also have a negative outlook on the long-term ratings on El Salvador. Chile continues to have the highest sovereign rating in Latin America (long-term foreign currency rating of 'AA-') and Trinidad & Tobago the highest sovereign rating ('A') in the Caribbean. Standard & Poor's has a 'BBB' long-term foreign currency rating on both Brazil and Mexico. However, we have a positive outlook on the long-term rating on Mexico and negative outlook on the long-term rating on Brazil, reflecting diverging trends in economic policies that could change the sovereign's creditworthiness.