S&P downgrades Ecuador

Standard & Poor’s said it lowered the long-term foreign- and local-currency sovereign credit ratings on the Republic of Ecuador to B from B+.

The agency also said it affirmed the country’s B short-term foreign- and local-currency sovereign credit ratings and lowered the transfer and convertibility assessment to B from B+.

The outlook is stable.

The downgrades reflect that tensions between Ecuador’s government and society have risen following the fall of global oil prices, limiting the government’s ability to implement fiscal measures, S&P said.

Oil and oil derivatives represent nearly 15% of economic output, 50% of exports and 25% of fiscal revenues, the agency said.

Lower revenues from oil have led the government to attempt to raise other revenues in order to sustain expenses and aggregate demand, S&P said.

Lower oil revenues also have prompted the government to cut more than $1 billion in planned capital expenditure, the agency added.

Both efforts have met with social protests and have subsequently partly been modified, S&P said.

The agency also said it expects that Ecuador will continue to use the U.S. dollar as its currency, constraining the country’s monetary flexibility and the central bank’s ability to act as a lender of last resort.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.