S&P Global Ratings' corporate default tally in Latin America rose to 14 (including defaults from both financial and nonfinancial companies and from companies that were not rated and confidentially rated) in 2020 as the COVID-19 pandemic took its toll on business in the region. This increase largely aligned with global corporate defaults, which totaled 226, up 91% from the previous year, largely because of the pandemic's effects on economic growth (see "The 2020 Global Corporate Default Tally Reached 226," Jan. 8, 2021). The Latin American region's trailing-12-month speculative-grade default more than doubled in 2020, to 3.95% from 1.22%, while the global speculative-grade default rate increased to 5.51% from 2.54%.

Despite the rapid rise in defaults, the 2020 tally wasn't the historical high for Latin America. In 2016, there were 15 defaults, mainly concentrated in Brazil. At that time, the region faced intense political and economic challenges linked to the investigation known as Operação Lava Jato. Furthermore, defaults also reached 14 in 2009 due to the impact of the global financial crisis. The all-time high occurred in 2002, with 56 defaults, largely from Argentina, which was in the midst of a financial and economic crisis.

Over time, Latin America's ratings distributions has deteriorated, with the number of speculative-grade (rated 'BB+' or lower) companies--particularly in the 'B' and 'CCC' rating categories--in 2020 reaching its highest in a decade, representing 27.81% of total Latin American ratings (see chart 3). This trend is partly explained by Argentine issuers, the majority of which are rated at the same level as the sovereign, in the 'CCC' category. Latin America's negative bias (the proportion of issuers with negative rating outlooks or ratings on CreditWatch with negative implications, and a forward-looking indicator of potential credit deterioration) also soared in 2020, to 47% as of Dec. 31 from 31% a year prior--propelled by an increase among Mexican companies.

S&P Global Ratings assigned new ratings to 31 Latin American companies in 2020, down from 46 in 2019. Of the 31 newly rated companies, 28 (90%) were rated speculative-grade. Five of the 28 newly rated speculative-grade issuers were previously rated entities that had emerged from default.

Latin American Ratings Took A Hard Hit From The Pandemic

Latin America has been one of the regions hardest hit by the pandemic in emerging markets, and we expect it to be among the slowest to recover. Recently, however, services sectors have been performing better than expected (see "Economic Outlook Latin America Q3 2021: Despite A Stronger 2021, Long-Term Growth Obstacles Abound," June 24, 2021). Still, many sectors have been slow to recover from the pandemic stress, including autos, oil and gas, transportation, chemicals, real estate companies and homebuilders, hotels and other lodging, and retail sectors (see "The Lagging Seven: Corporate Latin American Sectors Struggle To Exit The Pandemic," May 27, 2021).

As expected, the recession hit the weakest ratings the hardest. Since late February 2020, numerous 'BB' rated issuers have slipped into lower rating categories, while 40% of ratings in the 'CCC' category have defaulted. As chart 3 shows, the ratings distribution has skewed to lower levels, especially 'CCC+', since the end of February 2020.

Regional Default Trends In 2020

The number of Latin American corporate defaults increased to 14 in 2020 from six a year before, making up 7% of the 226 global defaults.

Of the 14 defaults, 10 came between the final week of April and the first week of July, and from sectors whose operations felt a severe impact from the pandemic, like transportation (mainly airlines) and leisure time/media sectors (hotels and casinos), where revenue streams dried up and the market's appetite for debt was limited to a small number of investment-grade (rated 'BBB-' or higher) issuers. The remaining four defaults came after October and included two Argentine companies that completed debt exchanges (following regulatory limitations on foreign exchange imposed to protect the country's international reserves) that we viewed as distressed.

Four of the corporate defaults were from Mexico; three each were from Brazil, Argentina, and Chile; and one was from Panama.

By debt amount, the default of Chile-based Latam Airlines Group S.A. on May 27, 2020, was the largest corporate default in the region, with $1.8 billion of rated debt outstanding at the time of default (see "Latam Airlines Group S.A. Ratings Lowered To 'D' On Chapter 11 Filing," May 27, 2020). The top three issuers by defaulting debt, Chile-based Latin America Airlines Group S.A., Brazil-based Oi S.A., and Panama-based Avianca Holdings S.A., accounted for 61% of defaulting debt from the region.

By sector, leisure time/media had the highest default rate in Latin America in 2020, at 41.67%, followed by transportation, real estate, and telecommunications at 8.33%, 7.14%, and 6.67%, respectively.

Table 1

Itemized 2020 Latin American Corporate Defaults
Company name	Reason for default	Country	Industry	Debt amount (mil.$)	Default date	Next-to-last rating	Date of next-to-last rating	Rating one year prior to default	Rating three years prior to default	First rating	Date of first rating
Enjoy S.A.	Bankruptcy	Chile	Leisure time/media	300	4/24/2020	B-	11/28/2019	B	-	B-	5/11/2017
Avianca Holdings S.A.	Chapter 11	Panama	Transportation	1,595	5/11/2020	CCC-	5/5/2020	-	-	B-	12/20/2019
Aeropuertos Argentina 2000 S.A.	Distressed exchange	Argentina	Transportation	750	5/19/2020	CC	4/29/2020	B+	B+	B	11/26/2010
Latam Airlines Group S.A.	Chapter 11	Chile	Transportation	1,800	5/27/2020	CCC-	5/22/2020	BB-	BB-	BB	6/10/2013
Grupo Famsa S.A.B. de C.V.	Missed principal	Mexico	Consumer services	81	6/2/2020	CCC-	12/13/2019	B-	B	B	7/12/2010
Grupo Aeromexico S.A.B. de C.V.	Chapter 11	Mexico	Transportation	400	7/1/2020	B-	5/21/2020	-	-	BB-	1/24/2020
Grupo Posadas S.A.B. de C.V.	Missed interest	Mexico	Leisure time/media	400	7/1/2020	CC	6/26/2020	B+	B+	BB-	7/15/2004
Oi S.A.	Distressed exchange	Brazil	Telecommunications	1,654	10/9/2020	CC	6/18/2020	B	-	CCC+	3/22/2018
Banco Hipotecario S.A.	Distressed exchange	Argentina	Financial institutions	350	10/14/2020	CC	9/9/2020	B-	B	B-	4/25/2009
Corp Group Banking S.A.	Missed interest	Chile	Financial institutions	500	10/16/2020	CC	10/6/2020	CCC+	B-	BB	1/18/2013
IRSA Inversiones y Representaciones S.A.	Distressed exchange	Argentina	Real estate	360	11/12/2020	CC	10/26/2020	B-	B	BB	6/1/1999
		Total		8,190
Excludes confidential issuers. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Elevated Downgrades In 2020

In 2020, 32.21% of rated Latin American corporate issuers were downgraded (excluding defaults), compared with only 10.62% in 2019 and 20.32% in 2018. About 34% of those downgrades were for issuers rated in the 'BBB' category (36% if we exclude defaults), followed by 29% from the 'B' category and 27% from the 'BB' category.

Sovereign stress influenced corporate downgrades

Last year S&P Global Ratings lowered its ratings or revised rating outlooks to negative on many sovereigns, including Argentina, Chile, Mexico, Panama, Trinidad and Tobago, Ecuador, Suriname, Belize, Bolivia, and Costa Rica. Many of these sovereigns' economic and fiscal profiles were already quite weak prior to the pandemic, with limited fiscal and monetary flexibility, high dependence on tourism, remittances, and commodity exports that affected the ratings (see "How The COVID-19 Pandemic Has Affected Sovereign Creditworthiness In Latin America And The Caribbean," May 21, 2020). Most of these sovereign rating actions were followed by similar actions on corporate ratings in those countries.

Table 2

Latin American Corporate Default Summary
Year	Total defaults*	Investment-grade defaults	Speculative-grade defaults	Default rate (%)	Investment-grade default rate (%)	Speculative-grade default rate (%)
1997	0	0	0	0.00	0.00	0.00
1998	1	0	0	0.00	0.00	0.00
1999	9	0	9	5.06	0.00	8.33
2000	2	0	2	1.05	0.00	1.64
2001	21	0	12	5.53	0.00	8.63
2002	56	0	52	22.32	0.00	31.52
2003	13	0	12	5.85	0.00	8.51
2004	2	0	2	0.90	0.00	1.38
2005	1	0	1	0.41	0.00	0.63
2006	1	0	1	0.36	0.00	0.52
2007	0	0	0	0.00	0.00	0.00
2008	3	1	2	0.84	0.93	0.80
2009	14	0	13	3.45	0.00	5.06
2010	5	0	4	1.06	0.00	1.54
2011	0	0	0	0.00	0.00	0.00
2012	11	0	9	2.14	0.00	3.36
2013	8	0	6	1.30	0.00	2.08
2014	5	0	4	0.79	0.00	1.29
2015	9	0	8	1.51	0.00	2.55
2016	15	1	14	2.93	0.55	4.23
2017	3	0	3	0.60	0.00	0.90
2018	6	0	5	0.99	0.00	1.50
2019	6	0	4	0.80	0.00	1.22
2020	14	0	13	2.58	0.00	3.95
Average	9	0	7	2.52	0.06	3.73
Median	6	0	4	1.02	0.00	1.52
Standard deviation	12	0	11	4.56	0.22	6.50
Minimum	0	0	0	0.00	0.00	0.00
Maximum	56	1	52	22.32	0.93	31.52
Note: "Investment-grade"/"speculative-grade" defaults refer to defaulting entities within the year that were rated investment-grade/speculative-grade at the beginning of the period. *This column includes companies that were no longer rated at the time of default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 3

Global Corporate Default Summary
Year	Total defaults*	Investment-grade defaults	Speculative-grade defaults	Default rate (%)	Investment-grade default rate (%)	Speculative-grade default rate (%)	Total debt defaulting (bil. $)
1981	2	0	2	0.15	0.00	0.63	0.1
1982	18	2	15	1.22	0.19	4.46	0.9
1983	12	1	10	0.77	0.09	2.98	0.4
1984	14	2	12	0.93	0.17	3.31	0.4
1985	19	0	18	1.13	0.00	4.37	0.3
1986	34	2	30	1.74	0.15	5.75	0.5
1987	19	0	19	0.95	0.00	2.83	1.6
1988	32	0	29	1.39	0.00	3.88	3.3
1989	44	3	35	1.79	0.22	4.70	7.3
1990	70	2	56	2.74	0.14	8.12	21.2
1991	93	2	65	3.26	0.14	11.05	23.7
1992	39	0	32	1.50	0.00	6.12	5.4
1993	26	0	14	0.60	0.00	2.51	2.4
1994	21	1	15	0.63	0.05	2.12	2.3
1995	35	1	29	1.05	0.05	3.54	9.0
1996	20	0	16	0.51	0.00	1.81	2.7
1997	23	2	20	0.63	0.08	2.01	4.9
1998	56	4	48	1.28	0.14	3.67	11.3
1999	109	5	92	2.15	0.17	5.57	39.4
2000	136	7	109	2.48	0.24	6.24	43.3
2001	229	7	173	3.79	0.23	9.90	118.8
2002	226	13	159	3.60	0.42	9.50	190.9
2003	119	3	89	1.93	0.10	5.07	62.9
2004	56	1	38	0.78	0.03	2.03	20.7
2005	40	1	31	0.60	0.03	1.51	42.0
2006	30	0	26	0.48	0.00	1.19	7.13
2007	24	0	21	0.37	0.00	0.91	8.15
2008	127	14	89	1.80	0.42	3.71	429.63
2009	268	11	224	4.19	0.33	9.95	627.70
2010	83	0	64	1.21	0.00	3.03	97.48
2011	53	1	44	0.80	0.03	1.85	84.30
2012	83	0	66	1.14	0.00	2.59	86.70
2013	81	0	63	1.04	0.00	2.27	97.29
2014	60	0	45	0.69	0.00	1.44	91.55
2015	113	0	94	1.36	0.00	2.78	110.31
2016	163	1	143	2.09	0.03	4.24	239.79
2017	95	0	83	1.21	0.00	2.47	104.57
2018	82	0	71	1.02	0.00	2.07	131.65
2019	118	2	92	1.30	0.06	2.54	183.21
2020	226	0	198	2.74	0.00	5.51	353.82
Average	77	2	62	1.48	0.09	4.01	81.71
Median	56	1	45	1.21	0.03	3.17	22.40
Standard deviation	67	4	54	0.98	0.12	2.63	131.24
Minimum	2	0	2	0.15	0.00	0.63	0.06
Maximum	268	14	224	4.19	0.42	11.05	627.70
Note: "Investment-grade"/"speculative-grade" defaults refer to defaulting entities within the year that were rated investment-grade/speculative-grade at the beginning of the period. *This column includes companies that were no longer rated at the time of default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 4

Summary Of Latin American Net Annual Rating Activity
Year	Issuers	Upgrades (%)	Downgrades (%)*	Defaults (%)	Withdrawn ratings (%)	Changed ratings (%)	Unchanged ratings (%)	Downgrade/upgrade ratio
1997	67	5.97	5.97	0.00	7.46	19.40	80.60	1.00
1998	126	3.17	11.11	0.00	1.59	15.87	84.13	3.50
1999	178	0.56	21.91	5.06	3.93	31.46	68.54	39.00
2000	190	10.53	12.11	1.05	4.74	28.42	71.58	1.15
2001	217	4.15	27.65	5.53	11.52	48.85	51.15	6.67
2002	233	3.00	18.45	22.32	7.30	51.07	48.93	6.14
2003	205	7.80	6.83	5.85	12.68	33.17	66.83	0.88
2004	222	13.06	1.35	0.90	9.46	24.77	75.23	0.10
2005	245	12.24	1.63	0.41	10.61	24.90	75.10	0.13
2006	281	21.00	3.20	0.36	10.32	34.88	65.12	0.15
2007	322	26.40	3.11	0.00	11.49	40.99	59.01	0.12
2008	358	15.08	8.66	0.84	7.54	32.12	67.88	0.57
2009	377	5.84	21.22	3.45	9.02	39.52	60.48	3.64
2010	377	17.77	5.84	1.06	11.14	35.81	64.19	0.33
2011	383	21.93	6.01	0.00	8.62	36.55	63.45	0.27
2012	420	13.10	11.67	2.14	7.14	34.05	65.95	0.89
2013	462	18.83	11.26	1.30	9.31	40.69	59.31	0.60
2014	505	6.14	17.23	0.79	8.91	33.07	66.93	2.81
2015	529	7.56	19.47	1.51	9.83	38.37	61.63	2.58
2016	512	9.38	23.24	2.93	8.79	44.34	55.66	2.48
2017	501	9.58	12.18	0.60	10.38	32.73	67.27	1.27
2018	507	7.30	20.32	0.99	8.88	37.48	62.52	2.78
2019	499	5.41	10.62	0.80	7.82	24.65	75.35	1.96
2020	503	0.99	32.21	2.58	6.76	42.54	57.46	32.40
Weighted average		10.57	14.21	2.17	8.82	35.77	64.23	1.34
Average		10.28	13.05	2.52	8.55	34.41	65.59	1.27
Median		8.59	11.46	1.02	8.89	34.46	65.54	1.33
Standard deviation		6.94	8.49	4.56	2.55	8.58	8.58	1.22
Minimum		0.56	1.35	0.00	1.59	15.87	48.93	2.41
Maximum		26.40	32.21	22.32	12.68	51.07	84.13	1.22
Note: This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. *Excludes downgrades to 'D', shown separately in the defaults column. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 5

Rating Classification Of New Corporate Issuers In Latin America
	--First rating--
Year	AAA	AA	A	BBB	BB	B	CCC/C	Total	% IG	% SG
1997		1		21	31	11		64	34.4	65.6
1998		1	2	10	23	18		54	24.1	75.9
1999				5	14	8		27	18.5	81.5
2000			1	7	19	10		37	21.6	78.4
2001		1	1	10	23	24	2	61	19.7	80.3
2002				7	21	11	4	43	16.3	83.7
2003			2	11	19	17	7	56	23.2	76.8
2004				9	19	11	6	45	20.0	80.0
2005				6	20	30	4	60	10.0	90.0
2006		1		8	27	31	5	72	12.5	87.5
2007	1			9	29	31	2	72	13.9	86.1
2008			2	11	22	16	2	53	24.5	75.5
2009			1	4	23	16	5	49	10.2	89.8
2010		1	1	10	15	21	4	52	23.1	76.9
2011			4	16	19	26	3	68	29.4	70.6
2012			2	17	37	24	3	83	22.9	77.1
2013			4	18	34	31	4	91	24.2	75.8
2014		2		31	23	13	2	71	46.5	53.5
2015			3	16	15	7	5	46	41.3	58.7
2016			1	9	17	13	5	45	22.2	77.8
2017			2	9	20	24	1	56	19.6	80.4
2018			3	5	16	14	4	42	19.0	81.0
2019				4	14	25	3	46	8.7	91.3
2020		1		2	11	11	6	31	9.7	90.3
Total	1	7	29	253	501	433	71	1,295	22.4	77.6
Includes issuers that are assigned new ratings after default as well as those companies that receive ratings for the first time. IG--Investment-grade. SG--Speculative-grade. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 6

Annual Latin American Corporate Default Rates By Industry
(%)
Year	Aerospace/auto/capital goods/metals	Consumer services	Energy and natural resources	Financial institutions	Forest and building products/homebuilders	Health care/chemicals	High tech/computers/office equipment	Insurance	Leisure time/media
1997	0.00	0.00	0.00	0.00	0.00	0.00	0.00	n/a	0.00
1998	0.00	0.00	0.00	0.00	0.00	0.00	n/a	n/a	0.00
1999	23.53	6.67	0.00	0.00	0.00	0.00	0.00	0.00	15.00
2000	0.00	0.00	11.11	0.00	0.00	0.00	0.00	0.00	0.00
2001	23.53	2.78	0.00	14.63	0.00	0.00	100.00	0.00	0.00
2002	13.33	7.69	28.57	6.52	12.50	25.00	n/a	0.00	52.94
2003	0.00	0.00	0.00	0.00	6.25	0.00	n/a	0.00	11.11
2004	0.00	0.00	0.00	1.41	6.25	0.00	n/a	0.00	0.00
2005	0.00	0.00	7.14	0.00	0.00	0.00	n/a	0.00	0.00
2006	0.00	2.63	0.00	0.00	0.00	0.00	n/a	0.00	0.00
2007	0.00	0.00	0.00	0.00	0.00	0.00	n/a	0.00	0.00
2008	0.00	2.17	0.00	0.00	4.17	0.00	n/a	0.00	0.00
2009	7.69	8.57	0.00	2.21	8.00	10.00	0.00	0.00	10.00
2010	0.00	0.00	9.09	0.70	0.00	0.00	n/a	0.00	0.00
2011	0.00	0.00	0.00	0.00	0.00	0.00	n/a	0.00	0.00
2012	5.00	0.00	4.17	1.25	4.00	0.00	n/a	0.00	0.00
2013	0.00	0.00	4.17	0.58	7.14	0.00	0.00	0.00	0.00
2014	3.45	1.54	0.00	0.56	0.00	0.00	0.00	0.00	7.14
2015	9.38	4.62	3.33	0.00	3.57	0.00	0.00	0.00	0.00
2016	10.71	4.92	11.11	0.00	0.00	0.00	0.00	3.23	0.00
2017	0.00	0.00	4.00	0.00	0.00	0.00	0.00	0.00	0.00
2018	6.67	3.39	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2019	3.45	1.61	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2020	0.00	1.54	0.00	1.07	0.00	0.00	0.00	0.00	41.67
Weighted average	4.54	2.12	3.21	0.73	2.18	1.09	3.23	0.37	7.04
Average	4.45	2.01	3.45	1.21	2.16	1.46	7.69	0.15	5.74
Median	0.00	0.77	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Standard deviation	7.12	2.67	6.51	3.18	3.51	5.41	27.74	0.69	13.59
Minimum	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Maximum	23.53	8.57	28.57	14.63	12.50	25.00	100.00	3.23	52.94
	Real estate	Telecom	Transportation	Utility
1997	n/a	0.00	0.00	0.00
1998	n/a	0.00	0.00	0.00
1999	0.00	0.00	0.00	0.00
2000	0.00	5.00	0.00	0.00
2001	0.00	0.00	0.00	0.00
2002	100.00	27.27	0.00	43.48
2003	0.00	31.58	12.50	11.54
2004	0.00	0.00	0.00	0.00
2005	0.00	0.00	0.00	0.00
2006	0.00	0.00	0.00	0.00
2007	0.00	0.00	0.00	0.00
2008	0.00	5.88	0.00	0.00
2009	0.00	0.00	0.00	1.85
2010	0.00	0.00	0.00	1.72
2011	0.00	0.00	0.00	0.00
2012	0.00	0.00	0.00	6.45
2013	0.00	14.29	0.00	0.00
2014	0.00	0.00	0.00	0.00
2015	0.00	0.00	0.00	0.00
2016	7.14	7.14	8.33	0.00
2017	0.00	8.33	0.00	1.64
2018	0.00	0.00	2.63	0.00
2019	0.00	7.14	2.94	0.00
2020	7.14	6.67	8.33	0.00
Weighted average	1.54	5.42	1.98	2.72
Average	5.19	4.72	1.45	2.78
Median	0.00	0.00	0.00	0.00
Standard deviation	21.28	8.56	3.36	9.06
Minimum	0.00	0.00	0.00	0.00
Maximum	100.00	31.58	12.50	43.48
Includes investment-grade- and speculative-grade-rated entities. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 7

Cumulative Latin American Corporate Default Rates By Sector
(%)	--All financials--			--All nonfinancials--
Year	One-year	Three-year	10-year	One-year	Three-year	10-year
1997	0.00	N/A	N/A	0.00	N/A	N/A
1998	0.00	N/A	N/A	0.00	N/A	N/A
1999	0.00	0.00	N/A	6.04	7.84	N/A
2000	0.00	0.00	N/A	1.32	5.94	N/A
2001	14.29	17.24	N/A	3.43	12.08	N/A
2002	6.38	15.38	N/A	26.34	31.79	N/A
2003	0.00	16.67	N/A	7.95	35.43	N/A
2004	1.35	6.38	N/A	0.68	32.80	N/A
2005	0.00	1.85	N/A	0.60	9.27	N/A
2006	0.00	1.35	18.75	0.54	1.35	29.41
2007	0.00	0.00	20.00	0.00	0.60	37.62
2008	0.00	0.00	20.69	1.32	1.61	42.28
2009	2.03	2.48	15.38	4.37	3.98	41.06
2010	0.66	3.05	16.67	1.33	7.05	37.71
2011	0.00	2.70	6.38	0.00	5.68	34.95
2012	1.16	1.32	1.85	2.83	4.00	11.92
2013	0.52	2.67	1.35	1.85	5.15	6.08
2014	0.51	2.31	1.28	0.97	5.67	5.99
2015	0.00	1.05	2.11	2.47	4.43	8.60
2016	0.48	1.02	4.13	4.59	7.44	10.45
2017	0.00	0.49	4.58	1.01	7.41	13.66
2018	0.00	0.48	5.41	1.65	6.56	13.54
2019	0.00	0.00	3.29	1.35	3.36	10.22
2020	0.95	0.98	4.67	3.75	5.61	12.02
Average	1.18	3.52	8.44	3.10	9.32	21.03
Median	0.00	1.33	4.67	1.34	5.81	13.54
Standard deviation	3.10	5.46	7.46	5.35	10.12	14.09
Minimum	0.00	0.00	1.28	0.00	0.60	5.99
Maximum	14.29	17.24	20.69	26.34	35.43	42.28
"All financials" refers to financial institutions and insurance combined. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Past periods of sovereign stress

The Latin American 12-month trailing speculative-grade default rate in 2020 outpaced that of emerging markets overall, but it remained below the global speculative-grade corporate default rate. From 1997 to 2020, the Latin American speculative-grade corporate default rate exceeded the global default rate in only four years: 1999, 2002, 2003, and 2012. The spike to 8.33% in 1999 was related to the Asian financial crisis and the sovereign crisis in Russia. In 2002, the default rate spiked to 31.52%--the only time it rose to 10% or higher from 1997 to 2019. Argentina, which was in the midst of a depression, accounted for the majority of the defaults that year.

Periods of stress in the emerging markets have been marked by political instability, high external debt, unsustainable financial policies (such as high interest rates to maintain currency pegs), heavy dependence on exports, and unstable financial markets. These factors led to financial uncertainty, a loss of consumer confidence, and the collapse of asset bubbles, which hurt private consumption and investments and caused spikes in corporate defaults.

These trends were evident during the late 1990s and early 2000s. In Argentina, economic growth was strong during most of the 1990s, but a period of political uncertainty and GDP contraction followed from 1999 to 2002. Moreover, the Russian crisis and the devaluation of the Brazilian real resulted in a decline in Argentine exports and a further weakening of confidence and domestic consumption.

S&P Global Ratings lowered its sovereign credit rating on Argentina seven times from 2000 to 2001, and the country selectively defaulted in 2001, taking a heavy toll on corporations based there. Argentina's currency became steeply devalued as the country eliminated its peso-to-dollar peg, instituted price controls, froze local bank deposits, and legally mandated the conversion of local debt contracts from dollar to peso terms at government-specified exchange rates. Argentine corporate defaults totaled 18 in 2001 and 43 in 2002. These defaults were primarily in the financial institutions, utilities, and energy sectors.

Latin American Rating Performance

Our annual studies of corporate defaults in Latin America have identified a clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency (see chart 4).

The one-year weighted average Gini coefficient (a measure of ratings' ability to rank-order observed defaults) for rated Latin America-based corporate issuers from 1997 to 2020 was 76.26%, the three-year was 53.12%, and the five-year was 43.45%. (For details on the Gini methodology, see Appendix III.) Meanwhile, the one-year weighted average Gini coefficient for all global corporate issuers (since 1981) was 82.85%, the three-year was 75.32%, and the five-year was 71.54%. The Gini ratios for Latin America are lower than their global counterparts because of the region's smaller number of rated issuers, which leads to a higher likelihood that outliers could be distorting the data.

From 1997 to 2020, 205 companies defaulted in Latin America--a small portion of the 3,098 defaults recorded globally during the same period. Latin America's small sample size introduces some challenges in our analysis. For example, the average time to default for Latin American issuers was 2.84 years in 2019--notably shorter than the 7.21 years for defaults in 2020. Entities with higher ratings generally take a longer time to default, though this is less evident in Latin America because of the paucity of investment-grade defaults (see chart 5).

For example, Latin American issuers rated 'B' took an average of 3.51 years to default, while 'BB' rated issuers took 5.54 years. The average times to default from original rating for Latin American issuers are shorter across all rating categories than they are for the global pool. This is true regardless of whether the times to default are calculated from the original rating (see table 8) or from any subsequent ratings (see table 9).

This difference in the average timing (and the associated standard deviation) results partly from Latin America's significantly smaller volume of defaults in every rating category. For example, 649 issuers initially rated in the 'BB' category alone defaulted globally during the 40 years ended 2020, whereas the comparable number for Latin America was only 80 defaults in the past 24 years (which is the extent of our data on the region).

Table 8

Time To Default From Original Rating Among Corporate Defaulters (Latin America Versus Global)
Original rating	Defaults	Average years from original rating	Median years from original rating	Standard deviation of years from original rating
Latin America (1997-2020)
AAA	N.A.	N.A.	N.A.	N.A.
AA	N.A.	N.A.	N.A.	N.A.
A	N.A.	N.A.	N.A.	N.A.
BBB	25	5.7	4.8	3.8
BB	80	5.5	4.6	4.0
B	79	3.5	3.1	2.6
CCC/C	21	1.9	1.4	1.9
Total	205	4.4	3.9	3.6
Global (1981-2020)
AAA	8	18.0	18.5	11.4
AA	32	17.4	19.6	10.6
A	101	14.1	10.9	9.1
BBB	221	9.2	7.3	6.7
BB	649	7.1	5.4	5.9
B	1,734	5.1	3.7	4.3
CCC/C	353	2.2	1.3	2.7
Total	3,098	5.9	4.1	5.7
N.A.--Not available. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 9

Time To Default From Post-Original Ratings Among Corporate Defaulters (Latin America Versus Global)
Rating path to default	Average years from rating category	Median years from rating category	Standard deviation of years from rating category
Latin America (1997-2020)
AAA	N.A.	N.A.	N.A.
AA	N.A.	N.A.	N.A.
A	N.A.	N.A.	N.A.
BBB	4.6	4.4	2.3
BB	2.9	1.2	3.6
B	2.1	0.8	3.0
CCC/C	0.6	0.2	1.6
Total	1.7	0.6	2.9
Global (1981-2020)
AAA	27.4	27.7	10.0
AA	14.9	15.8	9.4
A	11.5	9.9	8.3
BBB	8.3	6.5	6.9
BB	6.1	4.2	5.8
B	3.3	1.9	3.9
CCC/C	0.9	0.3	1.7
Total	3.4	1.3	5.0
N.A.--Not available. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Looking at default rates by modifier (including the plus or minus after the rating) also shows that lower ratings have historically experienced higher default rates on average, though variability is possible in any given year (see table 10). Most of the defaults from past default cycles came from the lowest ratings.

Table 10

Latin American Corporate Default Rates By Rating Modifier
(%)	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C
1997	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A
1998	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A
1999	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.70	16.67	30.00	12.50	100.00
2000	N/A	N/A	N/A	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	16.67	0.00	50.00
2001	N/A	N/A	N/A	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	2.56	19.44	10.34	11.11	0.00	0.00
2002	N/A	N/A	N/A	0.00	N/A	0.00	0.00	0.00	0.00	0.00	7.69	6.25	16.67	3.70	42.11	38.46	83.78
2003	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	6.06	28.57	10.00	30.43
2004	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.85	0.00	0.00	6.25
2005	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55	0.00	0.00
2006	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	16.67
2007	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2008	0.00	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	2.33	0.00	0.00	0.00	2.38	0.00	4.35	0.00
2009	0.00	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.18	5.71	9.68	12.00	50.00
2010	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.30	0.00	0.00	0.00	23.08
2011	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2012	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.85	2.94	0.00	16.00	27.27
2013	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.75	0.00	5.71	2.17	16.67
2014	N/A	N/A	0.00	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.13	2.17	0.00	5.41
2015	N/A	N/A	0.00	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	1.22	0.00	5.00	8.11	0.00	5.71
2016	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	1.79	0.00	1.19	0.00	1.82	2.63	5.56	21.74	16.13
2017	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	15.79
2018	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.33	6.67	20.00
2019	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.13	2.13	0.00	20.00
2020	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.61	0.00	5.71	13.64	30.00
Average	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.07	0.10	0.37	0.42	2.06	2.73	7.31	5.73	23.51
Median	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.19	2.75	0.00	16.67
Standard deviation	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.36	0.47	1.58	1.37	5.04	4.01	11.24	9.50	26.66
Minimum	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Maximum	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	1.79	2.33	7.69	6.25	19.44	16.67	42.11	38.46	100.00
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Transition Tables And Cumulative Default Rates

Our analysis of rating transitions in 2020 suggests ratings behavior in Latin America is consistent with global trends, which have shown a negative correspondence between credit ratings and default probability. As expected, higher-rated issuers exhibit greater credit stability (as measured by the frequency of rating transitions) than their speculative-grade counterparts.

In Latin America, investment-grade issuers are largely in the 'BBB' category, and about 89.26% of those were still rated 'BBB' at the end of the 2020, compared with 95.80% in 2019 (and 90.15% globally in 2020). Meanwhile, the comparable metrics for corporate issuers rated 'BB' and 'B' were only 81.25% and 51.35%, respectively, in 2020. About 40% of the issuers rated in the 'CCC'/'C' categories transitioned to 'D' (default) in 2020, compared with 47.7% globally. However, caution must be used in interpreting the low stability rates associated with the 'CCC'/'C' rating categories because of the small sample size.

Table 11

One-Year 2020 Corporate Transition Rates: Latin America Versus Global
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Latin America
AAA	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
AA	0.00	100.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A	0.00	0.00	60.87	34.78	0.00	4.35	0.00	0.00	0.00
BBB	0.00	0.00	0.00	89.26	7.38	0.00	0.00	0.00	3.36
BB	0.00	0.00	0.00	0.00	81.25	9.62	1.44	0.96	6.73
B	0.00	0.00	0.00	0.00	0.00	51.35	29.73	7.21	11.71
CCC/C	0.00	0.00	0.00	0.00	0.00	10.00	40.00	30.00	20.00
Global
AAA	100.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA	0.00	87.31	9.60	0.00	0.00	0.00	0.00	0.00	3.10
A	0.00	0.00	92.89	4.04	0.00	0.07	0.00	0.00	3.00
BBB	0.00	0.05	0.59	90.15	4.47	0.22	0.00	0.00	4.52
BB	0.00	0.00	0.00	0.78	78.21	11.36	0.86	0.93	7.86
B	0.00	0.00	0.00	0.05	0.96	71.92	12.59	3.52	10.95
CCC/C	0.00	0.00	0.00	0.00	0.00	5.49	34.18	47.68	12.66
NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

This pattern is similar to the long-term trend of ratings behavior for all global rated issuers. Of all the Latin American companies rated 'AA' from 1997 to 2020, 83.02% retained this rating after one year, whereas only 68.42% of companies rated 'B' maintained that rating during the same period (see table 12). The difference between table 11 and table 12 is that table 11 shows rating transitions only for 2020, while table 12 shows the long-term average from 1997 to 2020.

Based on the transition analysis for a two-year time horizon--rather than a one-year horizon--lower ratings also tend to display less stability than higher ratings (see table 13).

Rating transitions by modifier also display the same general relationship, though differences in sample size occasionally create slight variations between adjacent rating categories (see table 14).

Table 12

Average One-Year Corporate Transition Rates
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Latin America (1997-2020)
AAA	50.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00
	(70.71)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(70.71)
AA	0.00	83.02	13.21	0.00	0.00	0.00	0.00	0.00	3.77
	(0.00)	(23.64)	(23.02)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(11.52)
A	0.00	0.55	85.08	10.50	1.10	0.28	0.00	0.00	2.49
	(0.00)	(1.67)	(10.52)	(9.10)	(3.66)	(1.08)	(0.00)	(0.00)	(4.46)
BBB	0.00	0.04	0.78	87.78	4.82	0.57	0.37	0.08	5.56
	(0.00)	(0.23)	(0.98)	(7.98)	(5.24)	(2.09)	(2.02)	(0.26)	(3.00)
BB	0.00	0.00	0.00	3.54	81.85	4.82	0.84	0.78	8.18
	(0.00)	(0.00)	(0.00)	(3.28)	(6.66)	(2.99)	(2.39)	(2.06)	(2.74)
B	0.00	0.00	0.00	0.05	6.07	68.42	6.78	4.26	14.43
	(0.00)	(0.00)	(0.00)	(0.30)	(4.52)	(8.97)	(8.48)	(5.32)	(3.24)
CCC/C	0.00	0.00	0.00	0.00	0.97	19.16	39.94	23.70	16.23
	(0.00)	(0.00)	(0.00)	(0.00)	(1.93)	(20.89)	(22.15)	(25.80)	(11.15)
Global (1981-2020)
AAA	87.06	9.06	0.53	0.05	0.11	0.03	0.05	0.00	3.11
	(7.18)	(7.22)	(0.82)	(0.24)	(0.28)	(0.17)	(0.34)	(0.00)	(2.43)
AA	0.48	87.24	7.76	0.47	0.05	0.06	0.02	0.02	3.89
	(0.53)	(5.17)	(4.14)	(0.68)	(0.19)	(0.20)	(0.06)	(0.07)	(1.81)
A	0.03	1.60	88.59	5.00	0.26	0.11	0.02	0.05	4.34
	(0.09)	(1.05)	(3.75)	(2.15)	(0.38)	(0.24)	(0.06)	(0.10)	(1.68)
BBB	0.00	0.09	3.24	86.50	3.56	0.43	0.10	0.16	5.92
	(0.03)	(0.15)	(1.62)	(3.90)	(1.57)	(0.65)	(0.21)	(0.24)	(1.54)
BB	0.01	0.03	0.11	4.55	77.81	6.80	0.55	0.63	9.51
	(0.05)	(0.08)	(0.24)	(2.01)	(4.38)	(3.08)	(0.70)	(0.81)	(2.16)
B	0.00	0.02	0.07	0.15	4.54	74.59	4.96	3.34	12.34
	(0.00)	(0.08)	(0.19)	(0.21)	(2.21)	(3.97)	(2.74)	(3.04)	(2.17)
CCC/C	0.00	0.00	0.10	0.17	0.55	12.47	43.10	28.31	15.29
	(0.00)	(0.00)	(0.40)	(0.62)	(0.88)	(7.45)	(8.49)	(11.29)	(4.95)
The Latin America figures are for 1997-2020. Numbers in parentheses are weighted standard deviations. NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 13

Average Two-Year Corporate Transition Rates
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Latin America (1997-2020)
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
AA	0.00	74.51	19.61	0.00	0.00	0.00	0.00	0.00	5.88
	(0.00)	(22.50)	(23.70)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(13.63)
A	0.00	1.18	74.63	17.70	1.18	0.29	0.00	0.00	5.01
	(0.00)	(2.97)	(12.58)	(11.17)	(3.77)	(1.09)	(0.00)	(0.00)	(5.85)
BBB	0.00	0.04	1.48	77.68	8.14	1.04	0.57	0.87	10.18
	(0.00)	(0.24)	(1.66)	(11.01)	(7.40)	(2.74)	(2.57)	(3.87)	(3.86)
BB	0.00	0.00	0.03	6.48	67.43	6.85	1.13	2.39	15.69
	(0.00)	(0.00)	(0.15)	(5.14)	(9.77)	(2.97)	(2.49)	(5.87)	(3.35)
B	0.00	0.00	0.00	0.06	10.24	49.27	8.09	8.61	23.73
	(0.00)	(0.00)	(0.00)	(0.31)	(7.02)	(7.59)	(8.75)	(8.29)	(4.06)
CCC/C	0.00	0.00	0.00	0.34	1.01	29.19	16.44	28.86	24.16
	(0.00)	(0.00)	(0.00)	(1.44)	(2.24)	(24.43)	(14.74)	(27.01)	(13.38)
Global (1981-2020)
AAA	75.71	16.19	1.43	0.11	0.24	0.05	0.11	0.03	6.15
	(10.15)	(10.60)	(1.47)	(0.30)	(0.46)	(0.23)	(0.41)	(0.17)	(4.24)
AA	0.85	76.31	13.71	1.20	0.18	0.13	0.02	0.06	7.54
	(0.70)	(8.15)	(5.90)	(1.11)	(0.33)	(0.28)	(0.06)	(0.12)	(2.90)
A	0.04	2.89	78.64	8.68	0.68	0.25	0.04	0.13	8.65
	(0.07)	(1.71)	(5.89)	(2.91)	(0.77)	(0.40)	(0.10)	(0.19)	(2.66)
BBB	0.02	0.16	6.02	75.31	5.62	0.97	0.19	0.44	11.26
	(0.07)	(0.23)	(2.46)	(6.20)	(1.99)	(1.06)	(0.29)	(0.62)	(2.51)
BB	0.01	0.04	0.26	8.17	61.03	9.98	1.00	1.92	17.59
	(0.05)	(0.10)	(0.48)	(2.97)	(6.41)	(2.72)	(0.88)	(2.14)	(2.98)
B	0.00	0.03	0.12	0.36	7.73	55.83	5.66	7.79	22.48
	(0.00)	(0.10)	(0.28)	(0.43)	(3.29)	(4.92)	(2.45)	(5.52)	(3.58)
CCC/C	0.00	0.00	0.13	0.45	1.01	16.70	20.55	37.30	23.86
	(0.00)	(0.00)	(0.45)	(1.12)	(1.10)	(7.36)	(7.34)	(11.95)	(6.85)
The Latin America figures are for 1997-2020. Numbers in parentheses are weighted standard deviations. NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 14

Average One-Year Transition Rates For Latin American Corporates By Rating Modifier (1997-2020)
(%)
From/to	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC	D	NR
AAA	50.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00
	(70.71)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(70.71)
AA+	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)	(N/A)
AA	0.00	0.00	33.33	66.67	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	(0.00)	(0.00)	(57.74)	(57.74)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
AA-	0.00	0.00	2.00	80.00	14.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.00
	(0.00)	(0.00)	(8.09)	(24.32)	(23.68)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(12.54)
A+	0.00	0.00	0.00	4.08	77.55	12.24	0.00	0.00	4.08	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.04
	(0.00)	(0.00)	(0.00)	(16.42)	(29.65)	(23.28)	(0.00)	(0.00)	(7.84)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(6.22)
A	0.00	0.00	0.00	0.00	3.96	74.26	16.83	0.99	0.99	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.97
	(0.00)	(0.00)	(0.00)	(0.00)	(12.28)	(26.90)	(25.39)	(7.12)	(5.78)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(7.40)
A-	0.00	0.00	0.00	0.00	0.00	7.08	72.17	13.21	1.89	0.94	0.00	1.89	0.00	0.00	0.47	0.00	0.00	0.00	2.36
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(9.56)	(18.00)	(14.91)	(4.48)	(3.46)	(0.00)	(6.02)	(0.00)	(0.00)	(2.06)	(0.00)	(0.00)	(0.00)	(4.03)
BBB+	0.00	0.00	0.00	0.00	0.00	0.00	2.78	79.21	13.26	1.31	0.00	0.00	0.33	0.00	0.00	0.00	0.00	0.00	3.11
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(4.23)	(19.69)	(19.26)	(2.35)	(0.00)	(0.00)	(1.10)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(4.81)
BBB	0.00	0.00	0.00	0.13	0.00	0.00	0.13	8.14	75.47	10.26	1.13	0.50	0.13	0.00	0.00	0.13	0.00	0.13	3.88
	(0.00)	(0.00)	(0.00)	(0.82)	(0.00)	(0.00)	(0.53)	(11.46)	(12.60)	(9.51)	(2.42)	(2.01)	(0.82)	(0.00)	(0.00)	(0.89)	(0.00)	(0.47)	(5.20)
BBB-	0.00	0.00	0.00	0.00	0.00	0.00	0.10	0.48	7.71	71.36	8.58	1.06	0.19	0.29	0.58	0.39	0.87	0.10	8.29
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.37)	(1.17)	(7.65)	(15.56)	(9.82)	(2.28)	(0.48)	(0.87)	(2.18)	(1.53)	(4.00)	(0.47)	(4.81)
BB+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.13	0.53	12.40	61.07	13.60	2.13	0.40	0.67	0.53	0.40	0.27	7.87
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.95)	(1.17)	(12.48)	(16.44)	(15.90)	(4.76)	(1.07)	(2.95)	(1.31)	(2.02)	(1.08)	(5.33)
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.08	0.00	0.76	9.24	66.19	12.29	1.53	0.34	0.17	1.19	0.34	7.88
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.52)	(0.00)	(1.49)	(9.46)	(14.87)	(14.57)	(2.61)	(0.75)	(0.94)	(4.22)	(1.15)	(4.51)
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.16	0.31	0.85	8.94	69.62	7.23	1.71	0.31	0.78	1.48	8.62
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.94)	(1.84)	(1.87)	(7.33)	(10.88)	(4.36)	(1.75)	(0.57)	(1.58)	(3.92)	(5.00)
B+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.27	1.22	11.96	55.84	8.97	3.94	2.58	2.58	12.64
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(1.62)	(2.26)	(9.87)	(12.69)	(9.41)	(4.48)	(5.07)	(3.52)	(5.95)
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.17	0.17	1.35	10.12	49.92	15.51	4.89	5.06	12.82
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(1.15)	(0.75)	(2.42)	(8.91)	(15.71)	(14.80)	(5.58)	(8.94)	(5.94)
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.20	0.00	0.20	0.20	4.59	11.58	43.31	15.17	5.79	18.96
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(1.25)	(0.00)	(0.93)	(0.74)	(9.23)	(11.32)	(16.71)	(19.64)	(8.63)	(9.70)
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.97	0.65	2.92	15.58	39.94	23.70	16.23
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(1.93)	(2.80)	(4.94)	(19.55)	(22.15)	(25.80)	(11.15)
Numbers in parentheses are weighted standard deviations. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

The negative correlation between ratings and defaults in Latin America endures over time, as seen from the cumulative default rates in tables 15 and 16 and chart 6. No Latin American corporate issuers rated 'AAA', 'AA', or 'A' have ever defaulted, while issuers rated 'BBB' had a less than 0.1%. default rate in the first year after they were rated and a less than 1% default rate in the second year.

Meanwhile, 'BB' rated Latin American companies had a 0.78% default rate in the first year after they were rated and a 2.41% default rate in the second year on average, from 1997 to 2020. Latin American companies rated 'B' had an average default rate of 4.26% in the first year and 8.79% in the second year after the initial rating.

However, the small number of issuers in our pool and the short period of our study limit our findings. Our 1997-2020 issuer ratings pool for Latin America covers only 1,313 issuers, compared with 20,651 issuers for our global study (1981-2020). And although this study covers the period from 1997 to 2020, more than 50% of the total Latin American issuer credit ratings in our pool were assigned after 2005. This means a significant portion of the pool isn't as mature as the global pool, which leads to averages that are more heavily influenced by recent pools, especially for longer time horizons.

Table 15

Comparison Of Corporate Cumulative Average Default Rates
(%)	--Time horizon (years)--
From/to	1	2	3	4	5	6	7	8	9	10
Latin America (1997-2020)
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	(0.00)
AA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
BBB	0.08	0.87	1.84	2.99	4.01	4.66	4.86	5.09	5.26	5.26
BB	0.78	2.41	4.23	5.91	7.32	8.32	9.06	9.47	10.05	10.56
B	4.26	8.79	12.31	15.22	17.06	18.33	19.37	20.23	20.90	21.84
CCC/C	23.70	29.06	32.16	32.16	33.68	35.42	37.04	37.79	38.64	38.64
Investment-grade	0.07	0.74	1.57	2.55	3.43	3.98	4.15	4.35	4.49	4.49
Speculative-grade	3.29	6.13	8.62	10.62	12.20	13.35	14.25	14.85	15.48	16.13
All rated	2.17	4.25	6.17	7.81	9.14	10.08	10.73	11.18	11.65	12.09
Global (1981-2020)
AAA	0.00	0.03	0.13	0.24	0.34	0.45	0.51	0.59	0.64	0.70
AA	0.02	0.06	0.11	0.21	0.30	0.41	0.49	0.56	0.63	0.70
A	0.05	0.13	0.22	0.33	0.46	0.60	0.76	0.90	1.05	1.20
BBB	0.16	0.43	0.75	1.14	1.54	1.94	2.27	2.61	2.93	3.24
BB	0.63	1.93	3.46	5.00	6.43	7.75	8.89	9.91	10.82	11.64
B	3.34	7.80	11.74	14.88	17.33	19.35	20.97	22.30	23.49	24.60
CCC/C	28.31	38.35	43.44	46.37	48.60	49.63	50.76	51.51	52.18	52.77
Investment-grade	0.09	0.24	0.41	0.63	0.86	1.09	1.30	1.50	1.69	1.88
Speculative-grade	3.71	7.19	10.18	12.63	14.64	16.29	17.67	18.82	19.86	20.81
All rated	1.53	2.99	4.27	5.34	6.24	7.00	7.64	8.18	8.66	9.11
The Latin America figures are for 1997-2020. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 16

Latin American Corporate Cumulative Average Default Rates By Rating Modifier (1997-2020)
(%)	--Time horizon (years)--
Rating	1	2	3	4	5	6	7	8	9	10
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA+	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
AA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
BBB+	0.00	0.00	0.00	0.00	0.25	0.52	0.52	0.52	0.52	0.52
BBB	0.13	0.26	0.68	1.59	2.09	2.45	2.45	2.45	2.45	2.45
BBB-	0.10	1.82	3.73	5.64	7.41	8.42	8.85	9.33	9.69	9.69
BB+	0.27	1.81	3.60	5.19	6.04	6.24	6.47	6.47	6.78	7.50
BB	0.34	2.10	3.59	4.83	5.89	6.29	7.18	7.68	8.24	8.87
BB-	1.48	3.02	5.23	7.41	9.51	11.52	12.40	12.93	13.66	13.98
B+	2.58	6.56	9.39	11.79	13.17	14.28	14.87	15.52	15.52	15.76
B	5.06	10.25	14.56	17.88	19.82	21.38	23.06	23.86	25.59	27.88
B-	5.79	10.35	14.03	17.24	19.68	20.83	21.72	22.98	23.35	23.77
CCC/C	23.70	29.06	32.16	32.16	33.68	35.42	37.04	37.79	38.64	38.64
Investment-grade	0.07	0.74	1.57	2.55	3.43	3.98	4.15	4.35	4.49	4.49
Speculative-grade	3.29	6.13	8.62	10.62	12.20	13.35	14.25	14.85	15.48	16.13
All rated	2.17	4.25	6.17	7.81	9.14	10.08	10.73	11.18	11.65	12.09
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Gini Ratios And Lorenz Curves

Like our global corporate default and transition study, this study illustrates that ratings are effective indicators of relative default risk. S&P Global Ratings has found a clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency. We use Gini coefficients to measure the correspondence between ratings and defaults.

Gini ratios measure the rank-ordering power of ratings over a given time horizon and compare the ratio of actual rank-ordering performance with theoretically perfect rank ordering. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated issuers, the Gini coefficient would be 100%. If corporate ratings only randomly approximated default risk, the Gini coefficient would be zero. Our calculations indicate that for Latin American corporate issuers from 1997 to 2020, the weighted average one-year Gini coefficient was 76.26%, the weighted average three-year was 53.12%, and the weighted average five-year was 43.45%. (For definitions and methodology, see Appendix III.)

We also examined the variations in Gini coefficients globally by region (see table 17). As expected, the Gini coefficients decline as the time horizon lengthens because longer time horizons allow for more credit degradation among higher-rated issuers. In the one-year Latin American Lorenz curve, for example, 98.87% of defaults occurred in the speculative-grade category, while speculative-grade ratings constituted only 65.15% of all Latin American corporate issuers (see chart 7). The five-year Lorenz curve shows that speculative-grade issuers constituted 86.24% of defaulters and only 64.90% of the entire sample (see chart 9). If the rank ordering of ratings had little predictive value, the cumulative share of defaulting corporate issuers and the cumulative share of all issuers would be nearly the same.

Table 17

Corporate Gini Coefficients By Region
(%)	--Time horizon--
Region	One-year	Three-year	Five-year	Seven-year
Global	82.85	75.32	71.54	69.16
U.S.	80.98	72.89	69.06	66.65
Europe	90.45	85.18	82.44	79.83
Emerging markets	76.96	63.02	55.77	52.18
Latin America	76.26	53.12	43.45	40.09
Latin America and emerging markets figures are for 1997-2020. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Appendix I: Default Methodology And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's CreditPro® database of long-term local currency issuer credit ratings. Most exhibits in this study are the direct output of the CreditPro® interface, while others reflect manipulation of the underlying database. We created charts 4 and 6-9 and tables 1-17 by manipulating the CreditPro® data.

An issuer credit rating reflects S&P Global Ratings' forward-looking opinion of a company's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation.

It is not necessary for a company to have rated debt to be assigned an issuer credit rating. While an issue credit rating is an assessment of default risk, it may also incorporate an assessment of the relative seniority or ultimate recovery of the issue in the event of default. The junior obligations of a company are typically rated lower than the senior obligations to reflect their lower priority in bankruptcy and ultimate recovery expectations. Alternatively, secured debt may be rated higher than the issuer credit rating. Notching also applies to the structural subordination of debt issued by operating subsidiaries or holding companies that are part of an enterprise that we view as a single economic entity.

Our ongoing enhancement of the CreditPro® database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, this poses no continuity problem because each study reports statistics going back to Jan 1, 1997. Therefore, each annual default study is self-contained and effectively supersedes all previous versions.

Issuers included in this study

For the purposes of this study, the emerging markets region consists of Angola, Argentina, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Bhutan, Bolivia, Bosnia and Herzegovina, Brazil, Brunei Darussalam, Cambodia, Chile, China, Colombia, Costa Rica, Curacao, Dominican Republic, Ecuador, Egypt, El Salvador, Fiji, Gabon, Georgia, Ghana, Grenada, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Republic of Korea, Kuwait, Lebanon, Liberia, Macau, Malaysia, Marshall Islands, Mauritius, Mexico, Moldova, Mongolia, Morocco, Namibia, Netherlands Antilles, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Sri Lanka, Syria, the market of Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, and Yemen.

For the purposes of this study, Latin America consists of Argentina, Aruba, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Curacao, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Honduras, Jamaica, Mexico, Netherlands Antilles, Panama, Paraguay, Peru, Trinidad and Tobago, Turks and Caicos Islands, Uruguay, and Venezuela.

This study analyzes the rating histories of 1,313 Latin American companies rated by S&P Global Ratings between Jan. 1, 1997, and Dec. 31, 2020. These include industrials, utilities, financial institutions, and insurance companies with global scale long-term local currency ratings. This analysis excludes public information (pi) ratings and ratings based on the guarantee of another company or government entity. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies and are excluded from this study.

To avoid double-counting, the CreditPro® database excludes subsidiaries with debt that is fully guaranteed by a parent or with default risk that is considered identical to that of a parent. The latter are companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so inextricably entwined with those of the parent that it would be impossible to imagine the default of one and not the other. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We included such subsidiaries for the period during which they had a distinct and separate risk of default.

Issuers with withdrawn ratings

S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. For the purposes of this study, a rating may be withdrawn as a result of a merger or acquisition. Others are withdrawn because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Definition of default

An obligor rated 'SD' (selective default) or 'D' (default) is in payment default on one or more of its financial obligations (rated or unrated) unless S&P Global Ratings believes that such payments will be made within five business days, irrespective of any grace period. S&P Global Ratings also lowers a rating to 'D' when an issuer files for bankruptcy or takes a similar action that jeopardizes its payments on a financial obligation.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. S&P Global Ratings assigns an 'SD' rating when it believes the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. This does not necessarily indicate a default event, but the regulator might have the power to favor one class of obligations over another or pay some obligations and not others. Preferred stock is not considered a financial obligation, and thus a missed preferred stock dividend is not normally equated with default. While the 'R' rating was in place during the many of the years covered in this study, it was removed from all ratings scales on July 5, 2019 (see "S&P Global Ratings Definitions," Jan. 5, 2021).

We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of the date S&P Global revised the rating(s) to 'D', 'SD', or 'R'; the date a debt payment was missed; the date a distressed exchange offer was announced; or the date the debtor filed for or was forced into bankruptcy.

When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts--we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations as separate from its experience leading up to its earlier default.

Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition." S&P Global Ratings' credit ratings do not imply a specific probability of default.

Calculations

Static pool methodology.  We conduct our default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping issuers by rating category at the beginning of each year covered by the study. Each static pool is followed from that point forward. All companies included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged.

We use the static pool methodology to avoid certain pitfalls in estimating default rates, such as by ensuring that default rates account for rating migration and can be calculated across multiperiod time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods calculate default rates using only the most recent year's default and rating data, which might yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

Membership in static pools remains constant. Each static pool can be interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every update revises results back to the starting date so as to avoid continuity problems.

Issuers that have had ratings withdrawn--that is, revised to not rated (NR)--are surveilled with the aim of capturing a potential default. Because static pools include only issuers with active ratings as of their beginning date, we exclude companies with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include it in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 2001 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 2001. Companies first rated in 2001 and surviving members of the 2001 static pool form the 2002 static pool. All rating changes that took place are reflected in the newly formed 2002 static pool through these issuer ratings as of 12:01 a.m. on Jan. 1, 2002.

Consider the following example: An issuer is originally rated 'BB' in mid-2000, and S&P Global Ratings downgrades the company to 'B' in 2002. This is followed by a rating withdrawal in 2003 and a default in 2004. We would include this hypothetical company in the 2001 and 2002 pools with the 'BB' rating, which was the rating at the beginning of those years. Likewise, we would include it in the 2003 pool with the 'B' rating. It would not be part of the 2004 pool because it was not rated as of the first day of that year, and we would not include it in any pool after the last day of 2004 because S&P Global Ratings had withdrawn its rating on the company by then. Yet each of the three pools in which this company was included (2001-2003) would record its 2004 default at the appropriate time horizon.

Default rates.  We calculated annual default rates for each static pool, first in units and later as percentages with respect to the number of issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 24 years the study covers.

Issuer-weighted default rates.  All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings.

Average cumulative default rates.  The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and accumulating the average conditional marginal default rates. We calculated conditional default rates by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. Weights are based on the number of issuers in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

Transition analysis

Transition rates compare issuer credit ratings at the beginning of a period with the ratings at the end of the period. To compute one-year rating transition rates by rating category, we compared the rating on each entity at the end of a particular year with the rating at the beginning of the same year. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated.

For instance, an issuer continually rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985 to 1991. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to NR in the 1991 transition matrix. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix.

All 1981 static pool members still rated on Jan. 1, 2020, had 40 one-year transitions, while companies first rated on Jan. 1, 2020, had only one. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the ratings from 'AAA' to 'D', plus an entry for NR.

The only ratings considered in these calculations are those on issuers at the beginning of each static pool and those at the end. All rating changes that occur in between are ignored. For example, if an entity was rated 'A' on Jan. 1, 2020, and the rating was lowered to 'BBB' in the middle of the year and later raised to 'A' (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' and ended the year as 'A'. This also applies to transition matrices that span longer time horizons. If an issuer defaults or if the rating is withdrawn in the middle of the year, then the issuer would be considered not rated or rated 'D' on Dec. 31.

Multiyear transitions

Multiyear transitions were also calculated for periods of two to five years. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1997-2018 with the ratings at the end of the years 1999-2020. Otherwise, the methodology was identical to that used for single-year transitions.

We calculated average transition matrices on the basis of the multiyear matrices just described. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages.

Rating modifiers

We use rating modifiers (plus and minus signs) to calculate upgrade and downgrade percentages, as well as the magnitude of rating changes, throughout this study. However, some transition tables may use full rating categories for practical reasons. In other words, the use of a rating category suggests that movements to, for example, 'AA' from 'AA-' or to 'BBB+' from 'BBB-' are not considered to be rating transitions because the rating remained within the rating category.

Standard deviations

Many of the tables and charts in this study display averages of default rates, transition rates, and Gini ratios. Often these are issuer-weighted averages. Prior studies have shown that fluctuations in default rates and transitions can vary greatly depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages.

For the transition matrices, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. For example, in the average one-year transition matrix, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 24 cohorts beginning with the 1997 cohort and ending with the 2020 cohort. The squared difference between each cohort's transition rate and the weighted average--which is the data point in each cell--is multiplied by each cohort's weight. These weights are based on the contribution of each cohort's rating level to the 24-year total issuer base for each rating level. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights.

The standard deviations of Gini ratios are derived from the time series for all of their constituent annual cohorts. As an example, the standard deviation applied to the seven-year weighted average global Gini ratio was calculated from the time series of all available seven-year Gini ratios by cohort. In this case, these are the seven-year Gini ratios from the 1997 cohort through the 2014 seven-year cohort. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, not those of a population.

Time sample

This study limits the reporting of default rates to the 10-year time horizon. However, the Latin America data was gathered for 24 years, and all calculations are based on the rating experience of that period. In addition, average default statistics become less reliable at longer time horizons as the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages.

Appendix II: Additional Tables

Table 18

Static Pool Cumulative Corporate Default Rates Among All Latin American Ratings (1997-2020)
Rating: All rated
(%)		--Time horizon (years)--
Year	Issuers	1	2	3	4	5	6	7	8	9	10
1997	67	0.00	1.49	5.97	5.97	10.45	23.88	26.87	26.87	26.87	26.87
1998	126	0.00	3.97	4.76	10.32	27.78	34.13	34.13	34.13	34.13	34.13
1999	178	5.06	6.18	12.92	32.58	38.20	38.20	38.20	38.20	38.20	38.76
2000	190	1.05	6.84	28.42	34.21	34.21	34.21	34.21	34.21	34.74	35.79
2001	217	5.53	27.19	31.80	31.80	32.26	32.26	32.26	32.72	33.64	33.64
2002	233	22.32	27.04	27.47	27.90	27.90	27.90	28.33	29.18	29.18	29.18
2003	205	5.85	6.83	7.32	7.32	7.32	7.80	8.78	9.27	9.27	9.27
2004	222	0.90	1.35	1.35	1.35	1.80	2.70	3.15	3.15	3.60	4.50
2005	245	0.41	0.41	0.41	0.82	2.45	3.27	3.27	3.67	4.49	4.49
2006	281	0.36	0.36	1.07	2.85	3.56	3.56	4.98	6.05	6.05	6.41
2007	322	0.00	0.62	3.42	4.35	4.35	5.59	7.14	7.14	7.45	8.07
2008	358	0.84	4.47	5.59	5.59	7.26	8.66	8.94	9.22	10.34	10.34
2009	377	3.45	4.51	4.51	6.10	7.69	8.22	8.49	9.55	9.55	10.34
2010	377	1.06	1.06	2.92	4.51	5.04	5.31	6.63	6.63	7.43	7.43
2011	383	0.00	2.61	4.18	4.70	5.22	7.05	7.05	7.83	7.83	9.14
2012	420	2.14	3.81	4.29	5.24	7.14	7.14	8.10	8.10	9.29
2013	462	1.30	1.73	3.03	5.84	6.06	6.93	6.93	8.01
2014	505	0.79	2.18	4.95	5.15	5.94	6.14	7.52
2015	529	1.51	4.35	4.73	5.48	5.86	7.18
2016	512	2.93	3.32	4.10	4.49	6.05
2017	501	0.60	1.40	2.00	3.79
2018	507	0.99	1.78	3.75
2019	499	0.80	3.01
2020	503	2.58
Summary statistics
Marginal average		2.17	2.13	2.00	1.75	1.44	1.03	0.72	0.51	0.52	0.49
Cumulative average		2.17	4.25	6.17	7.81	9.14	10.08	10.73	11.18	11.65	12.09
Standard deviation		4.56	7.22	9.15	10.96	12.02	12.64	12.71	12.83	12.97	13.19
Median		1.02	3.01	4.40	5.48	6.60	7.18	8.29	9.22	9.42	10.34
Minimum		0.00	0.36	0.41	0.82	1.80	2.70	3.15	3.15	3.60	4.49
Maximum		22.32	27.19	31.80	34.21	38.20	38.20	38.20	38.20	38.20	38.76
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 19

Static Pool Cumulative Corporate Default Rates Among Investment-Grade Latin American Ratings (1997-2020)
Rating: Investment-grade
(%)		--Time horizon (years)--
Year	Issuers	1	2	3	4	5	6	7	8	9	10
1997	38	0.00	0.00	0.00	0.00	2.63	18.42	18.42	18.42	18.42	18.42
1998	61	0.00	0.00	0.00	3.28	21.31	22.95	22.95	22.95	22.95	22.95
1999	70	0.00	0.00	1.43	21.43	22.86	22.86	22.86	22.86	22.86	22.86
2000	68	0.00	0.00	22.06	23.53	23.53	23.53	23.53	23.53	23.53	23.53
2001	78	0.00	19.23	19.23	19.23	20.51	20.51	20.51	21.79	21.79	21.79
2002	68	0.00	0.00	0.00	1.47	1.47	1.47	2.94	2.94	2.94	2.94
2003	64	0.00	0.00	0.00	0.00	0.00	1.56	1.56	1.56	1.56	1.56
2004	77	0.00	0.00	0.00	0.00	1.30	1.30	1.30	1.30	1.30	1.30
2005	85	0.00	0.00	0.00	1.18	1.18	1.18	1.18	1.18	1.18	1.18
2006	88	0.00	0.00	1.14	1.14	1.14	1.14	1.14	1.14	1.14	1.14
2007	93	0.00	1.08	1.08	1.08	1.08	1.08	1.08	1.08	1.08	1.08
2008	107	0.93	0.93	0.93	0.93	0.93	0.93	0.93	0.93	2.80	2.80
2009	120	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.67	1.67	1.67
2010	117	0.00	0.00	0.00	0.00	0.00	0.00	1.71	1.71	1.71	1.71
2011	130	0.00	0.00	0.00	0.00	0.00	1.54	1.54	1.54	1.54	1.54
2012	152	0.00	0.00	0.00	0.00	1.97	1.97	1.97	1.97	1.97
2013	173	0.00	0.00	0.00	1.73	1.73	2.31	2.31	2.31
2014	194	0.00	0.00	1.55	1.55	2.06	2.06	2.06
2015	215	0.00	0.93	0.93	1.40	1.40	1.40
2016	181	0.55	0.55	1.10	1.10	1.10
2017	167	0.00	0.00	0.00	0.00
2018	174	0.00	0.00	0.00
2019	170	0.00	0.00
2020	174	0.00
Summary statistics
Marginal average		0.07	0.67	0.84	1.00	0.90	0.57	0.18	0.20	0.15	0.00
Cumulative average		0.07	0.74	1.57	2.55	3.43	3.98	4.15	4.35	4.49	4.49
Standard deviation		0.22	3.99	6.00	7.45	8.64	9.29	9.36	9.60	9.74	9.94
Median		0.00	0.00	0.00	1.10	1.35	1.54	1.84	1.71	1.84	1.71
Minimum		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.93	1.08	1.08
Maximum		0.93	19.23	22.06	23.53	23.53	23.53	23.53	23.53	23.53	23.53
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 20

Static Pool Cumulative Corporate Default Rates Among Speculative-Grade Latin America Ratings (1997-2020)
Rating: Speculative-grade
(%)		--Time horizon (years)--
Year	Issuers	1	2	3	4	5	6	7	8	9	10
1997	29	0.00	3.45	13.79	13.79	20.69	31.03	37.93	37.93	37.93	37.93
1998	65	0.00	7.69	9.23	16.92	33.85	44.62	44.62	44.62	44.62	44.62
1999	108	8.33	10.19	20.37	39.81	48.15	48.15	48.15	48.15	48.15	49.07
2000	122	1.64	10.66	31.97	40.16	40.16	40.16	40.16	40.16	40.98	42.62
2001	139	8.63	31.65	38.85	38.85	38.85	38.85	38.85	38.85	40.29	40.29
2002	165	31.52	38.18	38.79	38.79	38.79	38.79	38.79	40.00	40.00	40.00
2003	141	8.51	9.93	10.64	10.64	10.64	10.64	12.06	12.77	12.77	12.77
2004	145	1.38	2.07	2.07	2.07	2.07	3.45	4.14	4.14	4.83	6.21
2005	160	0.63	0.63	0.63	0.63	3.13	4.38	4.38	5.00	6.25	6.25
2006	193	0.52	0.52	1.04	3.63	4.66	4.66	6.74	8.29	8.29	8.81
2007	229	0.00	0.44	4.37	5.68	5.68	7.42	9.61	9.61	10.04	10.92
2008	251	0.80	5.98	7.57	7.57	9.96	11.95	12.35	12.75	13.55	13.55
2009	257	5.06	6.61	6.61	8.95	11.28	12.06	12.45	13.23	13.23	14.40
2010	260	1.54	1.54	4.23	6.54	7.31	7.69	8.85	8.85	10.00	10.00
2011	253	0.00	3.95	6.32	7.11	7.91	9.88	9.88	11.07	11.07	13.04
2012	268	3.36	5.97	6.72	8.21	10.07	10.07	11.57	11.57	13.43
2013	289	2.08	2.77	4.84	8.30	8.65	9.69	9.69	11.42
2014	311	1.29	3.54	7.07	7.40	8.36	8.68	10.93
2015	314	2.55	6.69	7.32	8.28	8.92	11.15
2016	331	4.23	4.83	5.74	6.34	8.76
2017	334	0.90	2.10	2.99	5.69
2018	333	1.50	2.70	5.71
2019	329	1.22	4.56
2020	329	3.95
Summary statistics
Marginal average		3.29	2.94	2.66	2.19	1.76	1.31	1.04	0.70	0.74	0.78
Cumulative average		3.29	6.13	8.62	10.62	12.20	13.35	14.25	14.85	15.48	16.13
Standard deviation		6.50	9.29	11.38	13.30	14.64	15.62	15.87	15.97	16.15	16.45
Median		1.52	4.56	6.67	8.21	9.44	10.64	11.81	12.75	13.33	13.55
Minimum		0.00	0.44	0.63	0.63	2.07	3.45	4.14	4.14	4.83	6.21
Maximum		31.52	38.18	38.85	40.16	48.15	48.15	48.15	48.15	48.15	49.07
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 21

Average Two-Year Latin American Corporate Transition Matrix (1997-2020)
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
AA	0.00	74.51	19.61	0.00	0.00	0.00	0.00	0.00	5.88
	(0.00)	(22.50)	(23.70)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(13.63)
A	0.00	1.18	74.63	17.70	1.18	0.29	0.00	0.00	5.01
	(0.00)	(2.97)	(12.58)	(11.17)	(3.77)	(1.09)	(0.00)	(0.00)	(5.85)
BBB	0.00	0.04	1.48	77.68	8.14	1.04	0.57	0.87	10.18
	(0.00)	(0.24)	(1.66)	(11.01)	(7.40)	(2.74)	(2.57)	(3.87)	(3.86)
BB	0.00	0.00	0.03	6.48	67.43	6.85	1.13	2.39	15.69
	(0.00)	(0.00)	(0.15)	(5.14)	(9.77)	(2.97)	(2.49)	(5.87)	(3.35)
B	0.00	0.00	0.00	0.06	10.24	49.27	8.09	8.61	23.73
	(0.00)	(0.00)	(0.00)	(0.31)	(7.02)	(7.59)	(8.75)	(8.29)	(4.06)
CCC/C	0.00	0.00	0.00	0.34	1.01	29.19	16.44	28.86	24.16
	(0.00)	(0.00)	(0.00)	(1.44)	(2.24)	(24.43)	(14.74)	(27.01)	(13.38)
Numbers in parentheses are weighted standard deviations, weighted by the issuer base. NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 22

Average Three-Year Latin American Corporate Transition Matrix (1997-2020)
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
AA	0.00	66.67	25.00	0.00	0.00	0.00	0.00	0.00	8.33
	(0.00)	(23.20)	(26.50)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(16.52)
A	0.00	1.90	65.40	21.90	1.90	0.32	0.00	0.00	8.57
	(0.00)	(4.06)	(15.19)	(12.51)	(6.11)	(1.13)	(0.00)	(0.00)	(6.77)
BBB	0.00	0.05	2.13	68.72	10.39	1.48	0.70	1.90	14.62
	(0.00)	(0.26)	(2.10)	(11.50)	(8.15)	(2.74)	(2.44)	(5.75)	(4.19)
BB	0.00	0.00	0.04	8.77	56.07	7.48	1.47	4.33	21.84
	(0.00)	(0.00)	(0.16)	(6.49)	(10.66)	(3.24)	(2.70)	(8.53)	(3.98)
B	0.00	0.00	0.00	0.31	12.31	36.45	8.11	12.13	30.69
	(0.00)	(0.00)	(0.00)	(1.00)	(7.33)	(6.92)	(8.30)	(9.60)	(5.00)
CCC/C	0.00	0.00	0.00	0.35	2.43	32.99	4.17	31.60	28.47
	(0.00)	(0.00)	(0.00)	(1.47)	(3.95)	(25.93)	(7.09)	(28.95)	(14.11)
Numbers in parentheses are weighted standard deviations, weighted by the issuer base. NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 23

Average Five-Year Latin American Corporate Transition Matrix (1997-2020)
(%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
AA	0.00	51.22	34.15	2.44	0.00	0.00	0.00	0.00	12.20
	(0.00)	(23.82)	(29.70)	(11.05)	(0.00)	(0.00)	(0.00)	(0.00)	(19.45)
A	0.00	3.70	51.11	27.41	2.59	0.00	0.00	0.00	15.19
	(0.00)	(5.68)	(12.52)	(12.67)	(5.42)	(0.00)	(0.00)	(0.00)	(6.77)
BBB	0.00	0.00	3.00	55.79	12.97	1.98	0.64	4.45	21.17
	(0.00)	(0.00)	(2.55)	(7.76)	(8.29)	(1.98)	(1.70)	(8.58)	(3.69)
BB	0.00	0.00	0.08	11.17	40.23	7.48	1.10	8.16	31.78
	(0.00)	(0.00)	(0.24)	(6.43)	(9.99)	(2.64)	(2.01)	(12.07)	(5.78)
B	0.00	0.00	0.00	0.85	13.90	21.74	5.15	17.15	41.21
	(0.00)	(0.00)	(0.00)	(1.14)	(6.97)	(5.01)	(5.41)	(11.45)	(6.63)
CCC/C	0.00	0.00	0.00	0.39	5.02	22.39	5.02	32.82	34.36
	(0.00)	(0.00)	(0.00)	(1.55)	(8.73)	(20.45)	(10.87)	(29.66)	(14.96)
Numbers in parentheses are weighted standard deviations, weighted by the issuer base. NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 24

Latin American Initial-To-Last Transition Rates By Rating Modifier For Nonfinancials (1981-2020)
(%)
From/to	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C	D	NR	Issuers
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0
AA+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0
AA	0.00	0.00	0.00	0.00	100.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1
AA-	0.00	0.00	0.00	16.67	0.00	16.67	0.00	16.67	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00	6
A+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00	1
A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00	2
A-	0.00	0.00	0.00	0.00	0.00	0.00	7.14	0.00	14.29	21.43	0.00	0.00	14.29	0.00	0.00	0.00	0.00	0.00	42.86	14
BBB+	0.00	0.00	0.00	0.00	0.00	0.00	4.55	18.18	22.73	27.27	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55	22.73	22
BBB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	9.26	18.52	12.96	1.85	0.00	1.85	0.00	1.85	0.00	0.00	7.41	46.30	54
BBB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.10	13.27	9.18	1.02	6.12	0.00	0.00	0.00	1.02	16.33	47.96	98
BB+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.37	1.37	5.48	8.22	5.48	9.59	0.00	0.00	1.37	1.37	17.81	47.95	73
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.86	0.00	0.86	3.45	10.34	12.93	2.59	3.45	0.86	1.72	17.24	45.69	116
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.60	0.00	4.22	3.61	16.27	3.01	0.60	0.00	1.20	21.08	49.40	166
B+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.86	0.00	0.86	5.17	12.93	2.59	0.86	4.31	18.10	54.31	116
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.74	0.87	0.87	2.61	6.09	0.87	3.48	26.09	57.39	115
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.10	0.00	0.00	1.10	0.00	0.00	0.00	2.20	8.79	19.78	67.03	91
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.56	0.00	0.00	0.00	0.00	1.56	1.56	0.00	3.13	15.63	28.13	48.44	64
NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 25

Latin American Initial-To-Last Transition Rates By Rating Modifier for Financials (1981-2020)
(%)
From/to	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C	D	NR	Issuers
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00	1
AA+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0
AA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	100.00	1
AA-	0.00	0.00	0.00	66.67	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33	3
A+	0.00	0.00	0.00	0.00	50.00	0.00	0.00	0.00	50.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2
A	0.00	0.00	0.00	0.00	25.00	0.00	50.00	0.00	25.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4
A-	0.00	0.00	0.00	0.00	0.00	14.29	14.29	7.14	21.43	0.00	0.00	0.00	7.14	0.00	0.00	0.00	0.00	0.00	35.71	14
BBB+	0.00	0.00	0.00	0.00	0.00	4.17	0.00	16.67	50.00	0.00	0.00	0.00	4.17	0.00	0.00	0.00	0.00	0.00	25.00	24
BBB	0.00	0.00	0.00	0.00	0.00	2.56	0.00	5.13	35.90	7.69	5.13	0.00	2.56	5.13	0.00	0.00	0.00	0.00	35.90	39
BBB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.92	9.80	13.73	1.96	1.96	19.61	0.00	1.96	0.00	0.00	7.84	39.22	51
BB+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.13	12.82	5.13	5.13	5.13	10.26	0.00	0.00	2.56	0.00	2.56	51.28	39
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.67	5.00	0.00	3.33	6.67	15.00	1.67	0.00	1.67	0.00	5.00	60.00	60
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.56	5.13	23.08	6.41	0.00	0.00	0.00	10.26	52.56	78
B+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.96	0.00	3.92	0.00	7.84	13.73	5.88	1.96	5.88	1.96	56.86	51
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.00	2.00	6.00	14.00	6.00	8.00	12.00	50.00	50
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	13.79	17.24	10.34	58.62	29
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	7.69	0.00	0.00	23.08	69.23	13
NR--Not rated. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Appendix III: Gini Methodology

To measure ratings performance, or accuracy, we plot the cumulative share of issuers by rating against the cumulative share of defaulters in a Lorenz curve to visually render the accuracy of their rank ordering. Max O. Lorenz developed the Lorenz curve as a graphical representation of the proportionality of a distribution. To build the Lorenz curve, we order the observations from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA').

If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal, and its Gini coefficient--which is a summary statistic of the Lorenz curve--would be zero. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated issuers, the curve would capture all of the area above the diagonal on the graph, and the Gini coefficient would be 100% (see chart 10). We calculate Gini coefficients by dividing area B by the total area A plus area B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario.

Appendix IV: Defaults In Profile

In 2020, we recorded 14 Latin American corporate defaults with a total of US$8.2 billion of debt. This appendix provides summaries of the events leading up to each default and, in some cases, events following the default. We also list the defaulting instruments that S&P Global Ratings rates for each company.

Enjoy S.A.

• US$300 million 10.50% notes due May 16, 2022

On April 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chilean casino operator Enjoy S.A. to 'D' from 'B-' after the company announced the suspension of its shareholder meeting to treat a capital increase while the board decided to file for judicial reorganization. The issuer's financial and operational situation had worsened because of the coronavirus pandemic.

On Oct. 1, 2020, S&P Global Ratings withdrew its 'D' issuer credit rating on the company at the issuer's request.

On May 3, 2021, S&P Global Ratings assigned a 'CCC+' long-term issuer credit rating to the company.

Table 26

Issuer Credit Rating - Enjoy S.A.
Date	To
03-May-2021	CCC+/Negative/--
01-Oct-2020	NR/--/--
24-Apr-2020	D/--/--
23-Mar-2020	B-/Watch Neg/--
23-Dec-2019	B-/Negative/--
28-Nov-2019	B-/Watch Neg/--
16-Aug-2019	B/Negative/--
31-Jan-2018	B/Stable/--
25-Aug-2017	B-/Watch Pos/--
11-May-2017	B-/Positive/--

Avianca Holdings S.A.

• US$550 million 8.375% notes due May 10, 2020
• US$550 million 9.00% notes due May 10, 2023
• US$495 million floating-rate first-lien bank loan due Aug. 18, 2022

On May 11, 2020, S&P Global Ratings lowered its issuer credit rating on Colombia-based air transportation company Avianca Holdings S.A. to 'D' from 'CCC-' after the issuer and its subsidiaries and affiliates voluntarily filed for bankruptcy under Chapter 11 in New York to preserve the business structure amid the severe impact of COVID-19 on the global air transportation industry. This also followed the issuer's missed $65.6 million principal payment on its 8.375% unsecured notes due May 10, 2020.

Earlier, on May 5, 2020, we lowered the issuer credit rating on Avianca to 'CCC-' from 'CCC' and kept the ratings on CreditWatch with negative implications. The CreditWatch placement reflected Avianca's weakening liquidity and the possibility that the absence of extraordinary financial support from shareholders or the Colombian government could force the company to default on the repayment of its 8.375% senior unsecured notes due 2020.

Table 27

Issuer Credit Rating - Avianca Holdings S.A.
Date	To
11-May-2020	D/--/--
05-May-2020	CCC-/Watch Neg/--
20-Mar-2020	CCC/Watch Neg/--
20-Dec-2019	B-/Stable/--
23-Jul-2019	SD/NM/--
13-May-2019	CCC+/Watch Neg/--
13-Apr-2016	B/Stable/--
05-May-2015	B+/Stable/--
28-Mar-2014	B+/Positive/--
25-Apr-2013	B+/Stable/--

Aeropuertos Argentina 2000 S.A.

• US$400 million 6.875% bonds due Feb. 1, 2027
• US$350 million variable-rate notes due 2027

On May 19, 2020, S&P Global Ratings lowered the issuer credit rating on Argentine airport operator Aeropuertos Argentina S.A. 2000 to 'SD' from 'CC'. The rating action followed the issuer's exchange of its senior secured notes due 2027 for the new notes, including the payment-in-kind of the four quarterly principal and interest payments in the next 12 months, to be repaid pro rata during the remaining term of the notes. We considered this exchange tantamount to default.

On May 21, 2020, after the settlement of the exchange, we raised the issuer credit rating to 'CCC+' from 'SD'.

On Sept. 18, 2020, we placed the issuer credit ratings on CreditWatch with negative implications after Argentina's central bank tightened regulations on accessing foreign exchange.

On March 9, 2021, S&P Global Ratings affirmed the 'CCC+' ratings on the company and removed them from CreditWatch with negative implications.

Table 28

Issuer Credit Rating - Aeropuertos Argentina 2000 S.A.
Date	To
09-Mar-2021	CCC+/Negative/--
18-Sep-2020	CCC+/Watch Neg/--
21-May-2020	CCC+/Negative/--
19-May-2020	SD/NM/--
29-Apr-2020	CC/Negative/--
30-Aug-2019	B-/Negative/--
20-Aug-2019	B/Negative/--
13-Nov-2018	B+/Stable/--
03-Sep-2018	BB-/Watch Neg/--
30-Oct-2017	BB-/Stable/--
04-Apr-2017	B+/Stable/--
03-Feb-2016	B-/Stable/--
18-Jun-2014	CCC-/Negative/--
13-Sep-2013	CCC+/Negative/--
01-Nov-2012	B-/Negative/--
24-Apr-2012	B/Negative/--
26-Nov-2010	B/Stable/--

Latam Airlines Group S.A.

• US$500 million 7.25% senior notes due June 9, 2020
• US$700 million 6.875% notes due April 11,2024
• US$600 million 7.00% notes due March 1, 2026
• US$275 million first-lien senior secured delayed draw term loan due June 29, 2021

On May 27, 2020, S&P Global Ratings lowered its issuer credit rating on Chile-based Latam Airlines Group S.A. to 'D' from 'CCC-' after the issuer volunteered a reorganization process under Chapter 11 of the U.S. Bankruptcy Code. We considered the debt restructuring under Chapter 11 to constitute a default.

On Aug. 17, 2020, we withdrew the rating on the company at its request.

Table 29

Issuer Credit Rating - Latam Airlines Group S.A.
Date	To
17-Aug-2020	NR/--/--
27-May-2020	D/--/--
22-May-2020	CCC-/Watch Neg/--
15-May-2020	CCC+/Watch Neg/--
27-Mar-2020	B/Watch Neg/--
17-Mar-2020	BB-/Watch Neg/--
17-Mar-2017	BB-/Stable/--
28-Mar-2016	BB-/Negative/--
25-Nov-2015	BB/Negative/--
07-Oct-2014	BB/Stable/--
10-Jun-2013	BB/Positive/--

Grupo Famsa S.A.B. de C.V.

• US$80.922 million 9.75% notes due Dec. 15, 2024
• US$250 million 7.25% notes due June 1, 2020
• MXN1000 unsecured term loan due June 21, 2025

On June 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican retailer Grupo Famsa S.A.B. de C.V. (GFamsa) to 'SD' from 'CCC-'. The downgrade to 'SD' followed GFamsa's missed interest and principal payments on its $59.1 million outstanding senior unsecured notes on June 1, 2020.

On Aug. 7, 2020, we lowered the issuer credit ratings to 'D' from 'SD' following GFamsa's bankruptcy filing in both Mexico and the U.S. On Dec. 12, 2020, we withdrew the issuer credit ratings on the company at its request.

Table 30

Issuer Credit Rating - Grupo Famsa S.A.B. de C.V.
Date	To
14-Dec-2020	NR/--/--
07-Aug-2020	D/--/--
02-Jun-2020	SD/NM/--
13-Dec-2019	CCC-/Negative/--
04-Oct-2019	CCC+/Negative/--
01-Nov-2018	B-/Negative/--
30-May-2017	B/Negative/--
29-Aug-2016	B/Stable/--
31-May-2016	B/Watch Neg/--
11-Feb-2016	B/Stable/--
29-Aug-2014	B/Negative/--
09-May-2013	B/Positive/--
12-Jul-2010	B/Stable/--

Grupo Posadas S.A.B. de C.V.

• US$400 million 7.875% notes due June 30, 2022

On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican lodging company Grupo Posadas S.A.B. de C.V. to 'D' from 'CC' after the issuer missed interest payments on senior unsecured notes due June 2022, which represented over 98% of total debt due, and announced it wouldn't make the payments within the grace period. The decision to miss interest payments of about US$15.5 million was based on prioritization of liquidity toward the company's operations.

Table 31

Issuer Credit Rating - Grupo Posadas S.A.B. de C.V.
Date	To
01-Jul-2020	D/--/--
26-Jun-2020	CC/Watch Neg/--
25-Mar-2020	CCC+/Negative/--
27-Nov-2019	B/Negative/--
30-Nov-2018	B+/Stable/--
27-Nov-2017	B+/Positive/--
29-Nov-2016	B+/Stable/--
03-May-2016	B+/Positive/--
21-Dec-2012	B/Stable/--
17-Jul-2012	CCC+/Watch Pos/--
27-Dec-2011	CCC+/Negative/--
12-May-2011	B-/Negative/--
12-Nov-2010	B-/Watch Neg/--
14-Jan-2010	B+/Stable/--
18-Dec-2009	B+/Negative/--
15-Jun-2009	B+/Watch Neg/--
08-May-2009	BB-/Watch Neg/--
07-Jan-2009	BB-/Negative/--
13-Oct-2008	BB-/Watch Neg/--
06-Jun-2007	BB/Stable/--
31-Aug-2006	BB-/Positive/--
03-Feb-2006	BB-/Stable/--
01-Dec-2005	BB-/Watch Neg/--
15-Jul-2004	BB-/Stable/--

Grupo Aeromexico S.A.B. de C.V.

• US$400 million 7.00% notes due Feb. 5, 2025

On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican commercial aviation services provider Grupo Aeromexico S.A.B. de C.V. to 'D' from 'B-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The company aimed to restructure its debt, capital structure, and business model to adapt to post-COVID-19 prospects.

Table 32

Issuer Credit Rating - Grupo Aeromexico S.A.B. de C.V.
Date	To
01-Jul-2020	D/--/--
21-May-2020	B-/Negative/--
20-Mar-2020	B+/Watch Neg/--
24-Jan-2020	BB-/Negative/--

Oi S.A.

• US$1.654 billion bonds due July 27, 2025
• BRL4.168 billion senior unsecured notes due Feb. 25, 2035
• US$128 million term A capex due March 15, 2023
• US$128 million term B capex due March 15, 2024
• US$397.36 million term capex due Nov. 30, 2023

On Oct. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Brazil-based telecom operator Oi S.A. to 'SD' from 'CC' after the issuer announced that the judicial court ratified an amendment to the company's judicial reorganization plan, which was approved by the majority of its creditholders on Sept. 8, 2020. The amendment includes a discount on debt for some of its debtholders, which we assess as equivalent to default.

On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on approval of the reorganizational plan amendment.

Table 33

Issuer Credit Rating - Oi S.A.
Date	To
15-Oct-2020	CCC+/Stable/--
09-Oct-2020	SD/--/--
01-Oct-2020	CC/Negative/--
05-Sep-2019	CCC+/Negative/--
28-Sep-2018	B-/Negative/--
15-Nov-2016	B/Stable/--
02-Nov-2016	BB-/Watch Neg/--
14-Apr-2016	BB-/Stable/--
08-May-2014	B+/Stable/--

Banco Hipotecario S.A.

• US$78.336 million 9.75% senior unsecured notes due Oct. 14, 2025
• ARS6.3 billion senior unsecured notes due Nov. 7, 2022
• ARS3.75 billion senior unsecured notes due Feb. 15, 2021
• ARS2.9 billion senior unsecured notes due Feb. 11, 2022
• ARS390.5 million senior unsecured notes due Aug. 11, 2021

On Oct. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based Banco Hipotecario S.A. to 'SD' from 'CC' after the issuer announced that 46.7% of the bondholders of its outstanding US$279.8 million series 29 notes due Nov. 30, 2020, accepted the exchange offer originally launched in early September. The transaction, which was settled on Oct. 14, was considered distressed as opposed to opportunistic.

On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' because the issuer had enough liquidity to pay the remainder of the bond's maturity.

On Dec. 16, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request.

Table 34

Issuer Credit Rating - Banco Hipotecario S.A.
Date	To
16-Dec-2020	NR/--/--
15-Oct-2020	CCC+/Stable/--
14-Oct-2020	SD/--/--
09-Sep-2020	CC/Negative/--
08-Apr-2020	CCC/Negative/--
16-Mar-2020	CCC/Watch Neg/--
02-Sep-2019	B-/Watch Neg/--
20-Aug-2019	B-/Negative/--
13-May-2019	B-/Stable/--
13-Nov-2018	B/Stable/--
03-Sep-2018	B+/Watch Neg/--
30-Oct-2017	B+/Stable/--
04-Apr-2017	B/Stable/--
05-Feb-2016	B-/Stable/--
18-Jun-2014	CCC-/Negative/--
13-Sep-2013	CCC+/Negative/--
01-Nov-2012	B-/Negative/--
24-Apr-2012	B/Negative/--
14-Sep-2010	B/Stable/--
24-Apr-2009	B-/Stable/--
24-Apr-2009	SD/--/--
30-Mar-2009	CC/Negative/--
31-Oct-2008	B-/Stable/--
12-Aug-2008	B/Stable/--
25-Apr-2008	B+/Negative/--
09-Oct-2006	B+/Stable/--
23-Mar-2006	B/Stable/--
17-May-2005	B-/Stable/--
02-Nov-2004	CCC+/Stable/--
16-Jan-2004	SD/--/--
16-Aug-2002	D/--/--
03-Dec-2001	SD/--/--
10-Oct-2001	CCC+/Negative/--
12-Jul-2001	B-/Negative/--
07-Jun-2001	B/Negative/--
08-May-2001	B/Watch Neg/--
26-Mar-2001	B+/Watch Neg/--
19-Mar-2001	BB-/Watch Neg/--
25-Jan-2001	BB-/Stable/--
14-Jan-1999	BB-/Negative/--
02-Apr-1997	BB/Stable/--
26-Jun-1996	BB-/Stable/--

Corp Group Banking S.A.

• US$500 million 6.75% notes due March 15, 2023

On Oct. 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chile-based bank holding company Corp Group Banking S.A. to 'D' from 'CC' after the issuer missed its US$16.9 million semiannual interest payment on its bond. The 30-day grace period ended Oct. 15, 2020.

Table 35

Issuer Credit Rating - Corp Group Banking S.A.
Date	To
16-Oct-2020	D/--/--
06-Oct-2020	CC/Watch Neg/--
24-Aug-2020	CCC-/Watch Neg/--
15-Apr-2020	CCC-/Negative/--
08-Apr-2020	CC/Negative/--
16-Mar-2020	CCC-/Negative/--
18-Dec-2019	CCC/Negative/--
30-Jan-2018	CCC+/Negative/--
02-Mar-2017	B-/Negative/--
13-Jun-2016	B/Negative/--
07-Apr-2016	B+/Watch Neg/--
30-Jan-2014	BB-/Watch Dev/--
23-Aug-2013	BB-/Stable/--
18-Jan-2013	BB/Watch Neg/--

IRSA Inversiones y Representaciones S.A.

• US$360 million 8.75% notes due March 23, 2023

On Nov. 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based diversified real estate company IRSA Inversiones y Representaciones S.A. to 'SD' from 'CC' following the settlement of a distressed exchange offer for 98.3% of its outstanding US$181.5 million series I 10.00% senior unsecured notes due Nov. 14, 2020.

On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on lower refinancing risk.

On Dec. 28, 2020, S&P Global Ratings withdrew its rating at the issuer's request.

Table 36

Issuer Credit Rating - IRSA Inversiones y Representaciones S.A.
Date	To
28-Dec-2020	NR/NR/--
17-Nov-2020	CCC+/Negative/--
12-Nov-2020	SD/NM/--
26-Oct-2020	CC/Negative/--
18-Sep-2020	CCC-/Watch Neg/--
28-May-2020	CCC-/Negative/--
17-Mar-2020	CCC+/Watch Neg/--
20-Aug-2019	B-/Negative/--
13-Nov-2018	B/Stable/--
03-Sep-2018	B+/Watch Neg/--
28-Jun-2018	B+/Stable/--
13-Jun-2017	B/Stable/--
03-Feb-2016	B-/Stable/--
18-Jun-2014	CCC-/Negative/--
13-Sep-2013	CCC+/Negative/--
01-Nov-2012	B-/Negative/--
24-Apr-2012	B/Negative/--
17-Dec-2010	B/Stable/--
14-Sep-2010	B-/Watch Pos/--
05-Nov-2008	B-/Stable/--
12-Jan-2007	B+/Stable/--
12-Oct-2001	NR/NR/--
10-Oct-2001	CCC+/Negative/--
08-Aug-2001	B-/Watch Neg/--
13-Jul-2001	B-/Negative/--
07-Jun-2001	B/Negative/--
08-May-2001	B/Watch Neg/--
26-Mar-2001	B+/Watch Neg/--
19-Mar-2001	BB-/Watch Neg/--
19-Mar-2001	BB+/Watch Neg/--
11-Jan-2001	BB-/Stable/--
01-Nov-2000	BB/Watch Neg/--
10-Feb-2000	BB/Stable/--
22-Jul-1999	BB/Negative/--
01-Jun-1999	BB/Stable/--

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Primary Credit Analyst:	Maria M Cangueiro, Buenos Aires + 54 11 4891 2149; maria.cangueiro@spglobal.com
Credit Markets Research:	Sudeep K Kesh, New York + 1 (212) 438 7982; sudeep.kesh@spglobal.com
Research Contributor:	Lyndon Fernandes, CRISIL Global Analytical Center, an S&P affiliate, Mumbai