Concentration of Power and Constitutional Reforms Affect Nicaragua's Credit Risk, Says Moody's
The credit rating agency maintains the country's score at B2 due to dependence on remittances and exports to the US.
TL;DR
- Moody's maintains Nicaragua's credit rating at B2, citing a stable outlook but acknowledging medium-term risks.
- Risks include geopolitical factors, sanctions, low income, small economy size, and a weak institutional framework with concentrated power.
- Despite fiscal strengths like consecutive surpluses and debt reduction, political risks have intensified following 2024-25 constitutional reforms that subordinate other branches of government to the executive.
- Nicaragua's high dependence on remittances from the United States is a key vulnerability, with potential decreases due to tightening U.S. immigration policies.
- The economy's reliance on raw material exports to the U.S. is another risk, with gradual export tariffs set to take effect in 2027.
- Diversification of financial and economic ties with China and other partners, along with fiscal and external surpluses, provide some resilience.
- Improved credit rating would require lifting sanctions, economic diversification away from the U.S., and changes in the nation's geopolitical and social context.