Rating downgrades will continue to outpace upgrades for Latin American companies in 2024, although at a slower pace than in 2023. Liquidity risk is highest in Argentina and Peru, and among sectors, agribusiness, airlines and corporates. Public services present some of the greatest liquidity risks, in general, details the rating agency.
Overall liquidity risk will remain low in most speculative grade non-financial, utilities and infrastructure companies in Latin America during 2024-2025.
However, while there will be an easing of overall credit conditions in 2024, high interest rates and volatile market access will continue to put pressure on the credit quality of
non-financial companies, especially those at the lower end of the speculative grade rating scale.
This was detailed in a report sent this Monday by the Moody's Ratings agency, which states that rating downgrades will continue to exceed upgrades in Latin American companies in 2024, although at a slower pace than in 2023.
"Liquidity risk is highest in Argentina and Peru, and among sectors, agribusiness, airlines and public service companies present some of the highest liquidity risks, in general," details the entity.
MODERATE GROWTH
Going into detail by sector and country, Moody's affirms that credit conditions will improve in some non-financial companies in Latin America in 2024, after a tight 2023 in a context of moderate economic growth.
Thus, both interest rates and inflation are declining in the region's major economies, but still high interest rates will continue to affect debt affordability. However, slowing growth in China could reduce commodity demand growth.
"The presidential elections in Mexico, Uruguay, Panama and the United States (USA) will also determine the political environment. Economic growth in Latin America will be uneven in 2024 and will remain below the trend throughout the region," he assures .
On the other hand, speculative grade non-financial companies in Latin America had approximately US$384 billion in total outstanding debt as of December 2023. Companies rated Ba, the highest speculative grade category, have better access to capital than their lower-rated peers and represent just under two-thirds of annual maturities.
However, companies with weaker credit quality have annual maturities of around US$5 billion and assume greater refinancing risk, with a higher probability of default.
On the other hand, as of December 2023, speculative-grade non-financial companies in Latin America had debt of US$81.3 billion maturing in the next 24 months and around 29% of this figure was in the hands of high-risk companies. liquidity compared to 22% of companies with medium risk and 49% with low risk.
Within the high-risk category, the telecommunications and media sector had the highest concentration of outstanding debt at 58% of the total US$4.8 billion in the sector, compared to 43% of the total in the oil sector. and gas, 24% of the total in the agribusiness sector and 34% of the total in public service companies.
While just over half of the future debt of the oil and gas sector is with the Mexican state oil company Petróleos Mexicanos (Pemex, B3 negative).
"The majority of public service companies in Latin America have a low to medium liquidity risk, except in Argentina, where four of the six high-risk public service companies in the region are located," the entity concluded.
