Financial Strength Drops In 22 Countries, Says Credit Insurer

Coface said within the fast growing BRIC sector (Brazil, Russia, India, China) all but Russia are relatively resilient.

It said India's "A3″ rating has remained unchanged since December 2004. The country, Coface found, "continues to be driven by internal demand and has been little affected by the crisis in international trade."

Indian companies, said Coface, are facing the most moderate slowdown of the BRIC countries (5 percent growth in 2009, which is 4 points below the 2007 level).

Brazil, Coface reported, which has had an "A4″ rating since December 2006, has a diversified economy and corporate debt in foreign currencies has not been as detrimental as it has in Central Europe.

Coface said it is maintaining the negative watch placed on China (rated "A3″) in January, due to company vulnerability in a context of overcapacity, stiff competition and reduced margins. But the adoption of measures to stimulate the economy and positive signs in the first quarter (an increase in credit and a rise in manufacturing output) has led Coface to maintain the January rating.

Russia, which Coface downgraded to "C," was seen as "the hardest hit" of the BRIC countries. It will have to deal with a growth shock of 11 points, which is the highest of the major economies (from 8.1 percent in 2007 to minus 3 percent in 2009)," said Coface.

The firm said Russian companies have very substantial foreign currency debts and are therefore badly affected by the credit crunch. Coface noted it is continuing to register payment defaults in Russia this year.

Countries of North Africa, said Coface, seem to be weathering the crisis relatively well. Tunisia and Morocco have diversified economies and banking systems with little exposure to toxic assets.

The company said that so far it has not observed any deterioration in company payment behavior. The oil-producing countries of North Africa and the Middle East entered the crisis from a position of enhanced financial strength (due to the oil boom of 2003-2008), from which the whole region has benefited and the area's ratings remain unchanged, said Coface.

Fran?ois David, Coface chairman, said in a statement: "The peak of the crisis should be reached in the first half of 2009. Our main scenario still forecasts the end of the credit crisis in the second half of 2009.

"We anticipate a recovery in early 2010, albeit a sluggish one due to the long process of debt reduction by the private economic agents: individuals and companies."

Coface offers credit insurance, factoring, ratings and business information, and receivables management, offering customers business lines to fully or partly outsource trade relationship management and to finance and protect receivables. Coface is a subsidiary of Natixis.