Central America: Country Risk Ratings
We provide country risk reviews for Central America countries including Cuba and El Salvador.
Cuba (CUB)
Cuba’s overall risk level remains high. Miguel Diaz-Canel has been president of the country since March 2023 after winning the elections. Political violence remains medium, with political interference and legal & regulatory risk at a high rating. Manuel Rocha, a former US ambassador in Bolivia, was arrested in Miami and is being charged by the US government for acting as a Cuban agent for more than 40 years. Xi Jinping, China’s president mentioned that "China will continue to firmly support the Cuban people, oppose foreign interference and the embargo, and safeguard (Cuba's) national sovereignty and dignity". Cuba is blaming US sanctions and COVID-19, for the poor status of its economy. Cuba also uncovered a human trafficking ring, which promised to Cuban citizens Russian citizenship in exchange for fighting in their war against Ukraine. Supply chain disruption remains high. Growth is expected to reach 3% in 2023, and a 2% expansion is expected in 2024, according to the economy minister of Cuba announcement in December, Alejandro Gil, who was also recently sacked by the president for trying to rise prices even further in Cuba’s almost bankrupt economy. Inflation was reported to be equal to 30% in 2023, from Gil, while food prices rose by 78%. Manuel Merrero, Cuba’s prime minister has announced measures, such as price and tax increases, but also the decrease in subsidies in order to restore the budget deficit that was projected to be higher than 18% of GDP. Sovereign non-payment remains medium high, with exchange transfer high. The value of the Cuban peso has been stagnant over the past 12 months, as it is pegged to the US dollar at a rate of 1 USD per 24 CUP. The risk of doing business remains very high, due to the current economic status of the country, as the inability of government to provide fiscal stimulus remains medium high.
El Salvador (SLV)
El Salvador’s overall risk level remains medium high. Nayib Bukele will remain president of the country after being re-elected in February, having 83% of the votes. Political violence and political interference remain medium high and legal & regulatory risk remains high. Bukele continues his fight against the gangs of El Salvador, with over 70,000 suspected gang members arrested since May 2022. For instance, he deployed 8,000 soldiers in Cabanas to surround the area, with gang members now leaving the urban centres of the country to hide in more rural areas. El Salvador’s authorities announced that the number of homicides dropped by about 70% in 2023. A former national security adviser, Alejandro Muyshondt, who was arrested for leaking documents, was found dead in state hospital, where he was sent after suffering a stroke. Meanwhile, Bukele has made El Salvador the first country in the world to accept bitcoin as a legal tender. The government has spent USD 120 million on buying bitcoins, but also USD 200 million to promote the coin to the citizens of El Salvador. Supply chain disruption remains medium high. Growth is expected to slow in 2024 to 1.9%, according to the IMF. El Salvador’s state energy authorities have presented a new legal framework to lawmakers in order to boost oil and gas exploration. CPI is forecast to drop to 2.4% in 2024 and carry on being low and stable in the following years. However, the current account deficit is projected to stay stagnant in 2024 at -4.5% of GDP, with a government debt/GDP ratio of 73.4%. El Salvador’s bitcoin policies have distanced the IMF from continuing with the USD 1.3 billion loan that was discussed during Bukele’s first term. According to research, 88% of the population did not use bitcoin during 2023 and it was only used for 1% of the total remittances. Sovereign non-payment and exchange transfer remain medium high, given the current account deficit and high government debt/GDP ratio. The currency utilised in El Salvador, since 2001 is the US dollar. The risk of doing business and the inability of government to provide fiscal stimulus remain medium high, as banking sector vulnerability remains medium low.
Honduras (HND)
Honduras’s overall risk level remains medium high. Xiomara Castro, leader of the Liberty and Refoundation party remains president of the country and the first female president. Political violence remains high, with legal & regulatory risk and political interference at a medium high. Former police chief Carlos “El Tigre” Bonilla has plead guilty on drug trafficking charges and was reportedly taking bribes in exchange for cocaine shipments to be passed without inspection. This occurred just before former president’s Juan Orlando Gomez trial, with the US Justice Department accusing him of abusing his power to run Honduras as a narco-state and receive millions in bribes from the cartels, despite being considered as an ally by the United States during his presidency. Moreover, Hernandez and Lobo, another former president, are being charged for fraud, for using public funds to finance their political campaign, a total of USD 12 million. Supply chain disruption remains medium high. Growth is expected to rise to 3.2% in 2024. Honduras’s economy is known for the production of agricultural products, such as coffee but also the textile industry, with 40% of the population working in the agricultural sector. CPI is forecast to drop to 4.7% in 2024, compared to 6.4% in 2023. The current account deficit is projected to decline to -4.9% of GDP in 2024 and to continue to decline in the next few years. The Central American bank for economic integration has approved of a USD 606.9 million loan to Honduras, to improve the transportation infrastructure. Sovereign non-payment and exchange transfer remain medium. The Honduran Lempira, the domestic currency has slightly appreciated in value against the US dollar over the past 12 months. The risk of doing business remains high, due to the high degree of corruption, as banking sector vulnerability remains medium low.
Nicaragua (NIC)
Nicaragua’s overall risk level remains medium high. Daniel Ortega, leader of the Sandinista National Liberation Front remains president of the country. Political violence and political interference remain high, with legal & regulatory risk at a very high. Nicaragua’s government has shut down the country’s scouting organisation and 7 other nongovernmental organisations. It has also arrested and then expelled 19 priests, to the Vatican on treason charges. The government has not issued any statements yet regarding any crimes committed by the priests. Since the protests in 2018, Ortega has accused church leaders of seeking to ruin his government, through a coup. Nicaragua has signed a free-trade agreement with China for 71% of its products, including leather, meat, seafood and automobile parts. Ortega’s government, which has been criticised for growing unemployment and poverty, which has led many citizens to migrate to other countries, such as the U.S. A record of remittances was reported in 2022 equal to USD 4.24 billion, by Nicaraguan migrants sending money to their home country. Meanwhile, supply chain disruption remains high. Growth is expected to rise to 3.3% in 2024, according to the IMF. CPI is forecast to drop in 2024 to 5% and is forecast to continue to decrease in the following years. Nicaragua who reported a current account surplus in 2023, after 2 consecutive years of a deficit, is projected to report a surplus of 0.2% of GDP in 2024, with a government debt/GDP ratio of 40.2%. Sovereign non-payment remains medium high, as exchange transfer remains medium low. Meanwhile, the Nicaraguan Central Bank has announced that it will end its progressive devaluation of the Nicaraguan cordoba against the US dollar, and will hold the exchange rate at 36.6243 cordobas per dollar. The risk of doing business remains high, due to the significant levels of corruption, the poor infrastructure and political and economic instability. Banking sector vulnerability and the inability of government to provide fiscal stimulus remain medium low.