The Guatemalan government's decision to dismiss an international anti-graft body is credit negative, Moody's said according to a Prensa Libre report.
President Jimmy Morales, a former comedian who was elected head of state in 2015, has been widely criticized for his decision to not renew the mandate of the International Commission Against Impunity in Guatemala, or CICIG, which is set to expire in 2019.
The commission was created in 2006 to combat wide-spread crime and bolster judicial proceedings against alleged criminals. It has since turned its attention to government corruption.
CICIG began probing the president's family for alleged corruption in 2017 and later supported an impeachment proceeding against Morales, who himself had been elected on a anti-corruption platform. Morales has denied any wrongdoing and has accused the CICIG of overstepping its remit.
Despite branding the move as credit negative, analyst Gabriel Torres told the publication that Moody's is not yet changing Guatemala's sovereign credit rating.
In September 2018, Fitch Ratings also warned that Guatemala's economic prospects could suffer due to heightened political tensions and continued political uncertainty in the country. The decision to cancel the CICIG mandate could further erode trust in public institutions, weaken the country's low governance indicators and pose continued governability challenges, Fitch said.