“Low” liquidity danger for corporations in Latin America: Moody’s.

NY. Nonetheless-high rates of interest and market volatility will proceed to have an effect on entry to credit score for Latin American corporations, particularly essentially the most indebted ones, regardless of which liquidity danger is “low,” Moody’s stated in a report on Monday.

“Ranking downgrades will proceed to outpace upgrades for Latin American corporations in 2024, albeit at a slower tempo than in 2023,” the score company stated.

Nevertheless, liquidity danger, which measures the power to satisfy credit score obligations within the brief time period, is usually “low.”

By nation, liquidity danger is highest in Argentina, the place high-risk issuers at the moment characterize 43% of the full within the nation, adopted by Peru (42%), Chile (30%) and Colombia (27%). In distinction, Brazilian corporations have the bottom liquidity danger for the 2024-2025 interval.

By sector, airways have the best distribution of corporations with excessive liquidity danger (40%), adopted by agribusiness (33%) and public service corporations (33%).

Though an “easing” of basic credit score situations is anticipated in 2024, “excessive rates of interest and risky market entry will proceed to place strain on the credit score high quality of non-financial corporations,” particularly these on the decrease finish of the score scale, the company warns in its report.

The slowdown in China, which may result in a drop in demand for uncooked supplies, the presidential elections in Mexico, Uruguay, Panama and america, and “uneven” progress, which is able to stay “under the development in the whole area”, are different components that would have an affect, the authors recall.

Latin American non-financial speculative-grade corporations had roughly $384 billion in complete excellent debt as of December 2023, of which $81.3 billion matures within the subsequent 24 months.

Round 29% of the latter determine was held by corporations with excessive liquidity danger, in contrast with 22% of corporations with medium danger and 49% with low danger.

Most Latin American utilities have low to medium liquidity danger, besides in Argentina, the place 4 of the area’s six high-risk utilities are positioned, the report says.