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Moody's: Cafta could benefit El Salvador's credit
In its annual report on El Salvador, Moody's Investors Service said the country's Baa3 foreign-currency country ceilings are supported by low, albeit higher, government debt ratios and the government's commitment to macroeconomic stability in the context of a dollarized economy.
Moody's said the analysis of a dollarized economy calls for more of a focus on fiscal indicators as creditworthiness tends to be more closely associated with the trends observed in government debt than to conventional external debt ratios in a dollarized economy.
Another recent development which may have potential benefits over the medium term for El Salvador was the approval of the Central American Free Trade Agreement by the U.S. Congress, the Moody's report said.
The country also continues to benefit from comprehensive structural reforms undertaken during the 1990's, said Moody's report.
Negative pressure can be found in El Salvador's low economic growth indicators and the fiscal challenges confronting the government, the report said.
The rating agency's report, "El Salvador: 2005 Credit Analysis," is a yearly update to the markets and is not a rating action.
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