S&P downgrades El Salvador

S&P said it lowered the long-term sovereign credit ratings on the Republic of El Salvador to B from B+.

The short-term sovereign ratings are unchanged at B.

The ratings on El Salvador remain on CreditWatch with negative implications.

The AAA transfer and convertibility assessment is unchanged.

The downgrades reflect deterioration in an assessment of El Salvador's institutional and governance effectiveness, which has contributed to a weaker external profile, the agency said, and a further erosion of the government's liquidity position.

The continued political stalemate between the governing party and the main opposition party has blocked progress on fiscal and pension reform, undermining investor confidence, S&P explained.

It also has imposed a heavy cost on financial management by weakening the government's ability to raise added revenues and to manage its debt, the agency said.

The ratings also consider El Salvador’s limited fiscal flexibility, lack of monetary flexibility and low per capita income, S&P said.

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