Central and Latin America: Country Risk Ratings

Barbados (BRB)

Barbados is deemed as a medium risk country. Mia Mottley continues to act as head of government (Prime Minister) as she has since 2018, ahead of 2025 legislative elections. Political risk and political violence is medium low with Barbados being seen as one of the most socially and politically stable developing countries. However, as Hurricane Beryl devastated much of the Caribbean including Barbados this year, Barbados is one of the countries vulnerable to the effects of climate change, such as rising sea levels, droughts and hurricanes expected to have a profound impact in years to come. This makes the risk of doing business medium high. PM Mottley is very committed to tackling these problems and is working closely with international organisations such as the UN and World Bank to change the picture developing nations. For example, the Bridgetown Initiative fronted by Mottley in partnership with the UN, is aiming to provide fiscal stimulus for developing countries who are confronted by immediate climate impacts in the face of a severe debt crisis as well as a plan to restructure how the global financial system deals with climate funding. General gross government debt in Barbados is high, with the IMF forecasting it at 107.5% of GDP in 2024 and 101% in 2025. Making sovereign non-payment and exchange risk high. This is proving a challenge for Barbados, so international corporation is and will continue to be vital as Barbados struggle to raise more finance and bear the costs of servicing high amounts of debt interest. The country’s currency, the Bajan Dollar is also pegged to the USD at a rate of 1USD to 2BBG. The clean energy transition will remain a difficulty for the Caribbean island of Barbados. Nonetheless, according to the IMF, real GDP is expected to grow 3.7% in 2024 but stagnate at a rate of 2.8% in 2025. Legal and regulatory risk is medium low. But tourism is an area where more growth is expected, the current account deficit (as a % of GDP) is expected to close from -7.0% in 2024 to -6.2% in 2025, and good infrastructure compared to other developing countries will boost future growth prospects despite climate risks.

El Salvador (SLV)

El Salvador remain a medium high risk country. Nayib Bukele is President after his landslide election victory in February. Political violence and political interference are both at a medium high level. President Bukele’s strong support was put down to the success in his first term at fighting against gangs and crime, resulting in El Salvador’s murder rate becoming one of the lowest in Latin America from a previously very high level. This has been mainly due to the emergency measures which have seen over 76,000 people arrested in which the minimum sentence for being part of a criminal gang was increased to 20 years from 3 years only 2 years ago.  Bitcoin is legal tender in El Salvador as the government has spent USD 120 million in bitcoin and President Bukele has set out his desire to create a tax-free Bitcoin City.  This is seen as a risky strategy by the IMF who are currently negotiating a fund-supported program to help boost public finances and work with El Salvador to govern better. The USD is however the main currency used in El Salvador as the risk of doing business remains medium high. According to the IMF, real GDP growth is set to stall in coming years with 2024’s expected 3% growth falling to 2.3% in 2025. El Salvador’s outlook is very dependent on the US. The US are their biggest trade partner, being the biggest importer of El Salvador goods (36% in 2023) and also lots of remittances come from the US. As the US economy is slowing, we expect El Salvador to see the impacts on slowing demand. They also have to deal with the increasingly world climate risk. For instance, they are very vulnerable to tropical storms which impacts agriculture significantly, but also infrastructure and people as 11 were reported dead after heavy rains in the country in June. Supply chain disruption is medium high. Government debt is a major issue in El Salvador, according to the IMF, it will be 84.4% of GDP in 2024 and 84.2% in 2025. Sovereign non-payment risk is medium high. In May, El Salvador Congress signed off USD1.5 billion debt issuance to raise sufficient finance to service outstanding debt which are set to mature in the near future. (USD1.75 billion of bonds are due in 2025, 2027 and 2029). This makes the government inability to provide fiscal stimulus medium high.

Jamaica (JAM)

Jamaica’s risk rating remains at medium. Andrew Holness is still PM ahead of the 2025 legislative elections. Political violence and political interference are both at a medium level in an emerging economy which has proven to be politically and socially stable. The major issue in which Jamaica are coming to terms with is the destruction caused by Hurricane Beryl, which devastated parts of Jamaica and the Caribbean. Jamaica were hit very hard with significant impacts such as loss of life, severe damage to infrastructure. Meanwhile, Jamaica has been an economy that have been held back by a previous debt crisis, which has seen a significant turnaround from the peak where government debt to GDP reached 143.9% in 2012. The IMF forecast Jamaican government debt to be at 67.5% in 2024 and 64.7% in 2025 and keep falling in the coming years. The inability of the government to provide fiscal stimulus and sovereign non-payment risks are both deemed as medium. This debt crisis has meant a significant period of fiscal tightening which has limited capital expenditure which is and will continue to hinder growth in the economy in the short run and long run and will not protect Jamaica in their much-needed climate transition. The IMF forecast real GDP to grow modestly at 1.8% in 2024 and 1.7% in 2025. Another factor halting long term growth for Jamaica is the threat of climate change. Weather patterns are getting more extreme, such as with Hurricane Beryl but Jamaica are also experiencing periods significant drought, damaging the agricultural sector and sending more people into poverty. Jamaica are becoming more food insecure and this food security is among one of the reasons explaining high inflation in recent times. However, inflation will be pulled closer to the Bank of Jamaica’s target of 5% ± 1%, as the IMF forecast a 5.5% price growth in 2024 and 5% in 2025. In addition, there is scope for growth in particularly sectors most notably tourism, the sector which employs a quarter of Jamaica’s workforce. This will aid Jamaica in achieving a stable current account balance. The IMF forecast a 0.3% current account surplus (as a % of GDP) in 2024 but a -0.9% deficit in 2025, allowing the exchange rate to remain solid and keep exchange transfer risk at medium. However, the reliance on US and UK tourists reflects the reliance of the tourism industry on strong global demand in some of the biggest economies in the world as the risk of doing business remains at a medium level.