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Moody's sinks Cuba deeper into junk territory

Moody's sinks Cuba deeper into junk territory

November 22, 2021 | Hernán Goicochea
Rating agency downgrades the Caribbean nation as sanctions and the COVID-19 pandemic limit the government's ability to pay external debt

Corporate & Sovereign Strategy Credit Ratings Downgrade Moody's Investors Service Cuba Asset Management Caribbean Coronavirus

Moody’s downgraded Cuba to Ca from Caa2 but kept a stable outlook, mooring the island nation's ratings deeper in junk territory as "the pandemic and economic sanctions" continue to limit the government's ability to pay external debt.

"Although Cuba fully reopened its borders to tourism, Moody's expects hard-currency inflows to recover only gradually because the island will face strong competition from other tourism destinations in the Caribbean and strict limitations imposed on travelers by the US government," the rating agency said in a report on Thursday.

Moody's added that the sanctions will continue to "weigh on investment perspectives."

The Cuban economy shrank 10.9% in 2020 as a result of major decline in tourism caused by the COVID-19 pandemic, Moody's said. In addition, the government's "limited ability" to provide basic goods and medicine during the pandemic continues to fuel political discontent.