Moody’s warns about credit risk in Latin America

Government economic aid programs in Latin America are important amid the Covid-19 pandemic, although they may be insufficient to avoid credit risks, the Moody’s risk rating agency warned today.

The additional terms granted by the banks for payments before the end of the year are likely to be breached due to the persistence of the epidemiological situation and the measures to which it entails, the agency considered in a report released Tuesday.

According to the entity’s senior vice president, Ceres Lisboa, most Latin American banks allowed loan payments to be deferred, but the increase in unemployment coupled with low corporate income will negatively impact the credit conditions of financial institutions.

According to Lisbon, with the persistence of high rates of infection, the risk of prolongation or renewal of confinement may further delay the slow recovery of the main Latin American economies.

On the other hand, the entity considered that some factors, such as low interest rates and savings derived from social transfers, could ‘temporarily ease the debt burden’ and maintain consumption while the aid packages from local governments are withdrawn .

The risk rating agency estimates that Brazilian banks are better positioned to bear losses, while Colombians and Peruvians are more exposed to adverse scenarios.

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