Investment Grade
A country's investment grade is derived from a rigorous study of its social, political and economic conditions. All these elements make it possible to place the issuer's risk on an international scale, in order to determine, in a way, the cost of its indebtedness.
When the public investment grade is compromised, the private sector is also at risk.
To understand it in some way, suppose that today a country issues bonds in the international markets at 4.5%, with a 20-year term. If investment grade is lost, this rate can rise, depending on the country risk, 100 basis points (1%) or more, affecting the entire debt curve quoted in the secondary market. So that 4.5% mentioned, you can go to a 5.5%to give an example.
Investor confidence is determined by the economic health of a country. Economic factors are the ones that are most observed at the time of rating. The agents in charge of this task basically evaluate the GDP (gross domestic product), tax collection and spending for operation and investment. And the same reports list the factors that deteriorate or improve the grade.
The crisis generated by the pandemic has already lasted 14 months and has brought with it the temporary and/or permanent closure of countless businesses. As a result, it has drastically limited several sectors of the economy.
