Ecuador’s difficulties in tackling its level of indebtedness and limited funding alternatives have further deteriorated the country’s position as a junk bond. International rating agency Standard & Poor’s (S & P) yesterday lowered the long-term rating from B to B-. A junk bond is the debt consideration for countries with a rating of B or lower as for risk. It is considered highly speculative and is accompanied by a higher interest rate in case of issuing foreign debt.
Ecuador (B-) and Argentina (B) are the two countries in South America that are in the category of junk bonds, only surpassed by Venezuela (CCC), which is already considered a substantial risk. The worse the rating, the greater the interest a country must pay to access financing in the markets and the shorter the term. (I)