UPDATE 1-Moody’s raises Guatemala credit rating to Ba1

(Adds comments from Moody’s)

NEW YORK, June 1 (BestGrowthStock) – Moody’s Investors Service on
Tuesday raised its foreign currency (Read more about trading foreign currency. government bond rating on
Guatemala one notch to Ba1 from Ba2, bringing it in line with
the local currency rating.

The outlook on the ratings is stable, Moody’s said in a
statement. The Ba1 rating moves Guatemala one step away from
investment grade.

“The upgrade of the foreign currency (Read more about trading foreign currency. bond rating unifies
that rating with its domestic currency counterpart,” Moody’s
sovereign ratings analyst Gabriel Torres said.

“This action reflects our view that, with rare exceptions,
a government is equally likely to default on its domestic and
foreign currency (Read more about trading foreign currency. obligations,” Torres said.

Guatemala is rated BB by Standard & Poor’s, one notch
below Moody’s. Fitch Ratings has the Central American nation at
BB-plus, equal to Moody’s new rating.

Moody’s cited a stable macroeconomic environment supported
by prudent fiscal and monetary policies. However it also noted
comparatively low levels of economic development, challenges in
raising taxes, and substantial social and infrastructure
needs.

Government deficits averaged only 1.7 percent of gross
domestic product since 2002, however they have trended higher
in the last two years, Moody’s points out.

A manageable debt burden and limited roll-over risk plus
multilateral funding support the rating, Moody’s said. It also
has a debt-to-GDP ratio of 23 percent versus 45 percent for
similarly rated countries.

“But despite above-trend growth prior to the world crisis,
Guatemala’s economy more recently has lagged similarly rated
sovereigns,” Moody’s statement said.

“Average GDP growth since 2003 was 3.6 percent, not enough
to make significant inroads on the country’s large social and
infrastructure needs. The ratings are also constrained by the
government’s historical difficulties raising tax revenues over
the 10 percent of GDP mark, which limits fiscal flexibility.”

Investing
(Reporting by Daniel Bases and Pam Niimi; Editing by Kenneth
Barry)

UPDATE 1-Moody’s raises Guatemala credit rating to Ba1