S&P affirms El Salvador

Standard & Poor's said it affirmed its BB+ long- and B short-term sovereign credit ratings on the Republic of El Salvador.

The outlook remains stable.

S&P said the ratings on El Salvador are supported by improving economic performance and a stable monetary environment. Economic performance has improved significantly in recent years, in part because El Salvador was the first nation in the region to implement the Central America Free Trade Agreement (DR-CAFTA) with the United States.

On the other hand, despite efforts to rationalize government operations, tax reform passed in 2005, and strong ongoing efforts to reduce tax evasion, El Salvador's narrow tax base has resulted in relatively high deficits for a fully dollarized economy. In addition, politics in El Salvador have become more polarized since the last congressional elections, mainly in preparation for the 2009 presidential election.

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