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Rating Game

Jan 1, 2005

Although Panama is tantalizingly close to attaining investment-grade status, an upgrade may elude the country for some time yet.

All Latin American countries except Chile, El Salvador and Mexico have junk ratings. Moody's and Fitch have Panama just one notch below investment grade, while Standard & Poor's has it two slots under, but an upgrade any time soon seems unlikely as rating agencies take a wait and see approach to the economic plan of President Martin Torrijos.

Moody's is keeping its Panama country ceiling at Baa1/P-2 (government bonds are rated Ba1) with a stable outlook. It points to the government's improved near-term growth prospects and moderate 2005-2006 financing. Fitch also maintains a stable outlook for Panama. It has rated Panama's long-term sovereign debt BB+ (short-term debt is rated B) since December 2003. In June 2004, it set the country ceiling at BBB, creating an unusual situation. Moody's and Fitch both set Panama's country ceiling above the sovereign rating, so private-sector issuers can attain credit ratings as high as BBB.

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management