S&P Global Ratings kept its classification of Chile as the highest in Latin America and raised its outlook to stable, citing the government’s commitment to halt a multi-year rise in the debt burden. Chile’s foreign currency rating was maintained at A, two notches above its closest regional peer, Uruguay.
S&P Global Ratings kept its classification of Chile as the highest in Latin America and raised its outlook to stable, citing the government’s commitment to halt a multi-year rise in the debt burden.
S&P had cut Chile’s rating twice since 2017, citing increased pressure on fiscal spending and rising debt levels. But the worst may now have passed. Chile’s five-year credit default swaps, a key indicator of country risk, are near their pre-pandemic levels and have fallen below regional peers such as Panama and Peru, after they were almost the same just a year-and-a-half ago.
“S&P’s decision to stabilize the outlook recognizes progress on fiscal consolidation and the enhancements to the fiscal institutional framework,” said Andres Perez, chief economist for Latin America at Banco Itau, after the announcement. “Still, looking forward, arresting the steady rise in public debt will demand significant spending restraint and higher growth in the near term.
Many strategists had expected a downgrade some time this year, according to a Bloomberg survey carried out in December. Chile sees its gross debt burden reaching 41.3 percent of GDP at the end of the year, more than doubling in the past decade.
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