Peru’s economy one grade away from ‘investment level’

Credit risk assessment agency Fitch Ratings today released a report indicating that Peru stands an increased chance of reaching a level of credit that will attract heavy foreign investment, in the wake of last week’s renegotiation of debt with the Club de Paris.

Last August Fitch raised its rating of Peru from BB to BB+, leaving it just one step away from the “investment level” – which in Latin America is held by only Mexico and Chile.

Theresa Paiz, the head of Fitch’s Latin America division, observed that Peru is likely to reach A level credit within two years, if current trends continue.

She added that external foreign debt is seen as one of Peru’s greatest weaknesses, so the agreement to repay 2.5 billion dollars to the Club de Paris is a welcome move. The payment will be made partially in Peruvian soles, and long-term bonds are being used to provide financing.

Paiz said that the growing economy and the government’s consistently good credit policy also contribute to Peru’s growing credit rating.

She voiced concerns, however, at the government’s lack of policies based on diversification of exports and similar long term measures, in case the “economic climate deteriorates” – a clear reference to the current rises in metals prices that have brought Peru’s economy rapid growth ‘on paper’. The country needs to consolidate the strong position it is now in, to provide stability in case the situation changes.

Moody’s also rates Peru at BB+, while Standard & Poor’s gives it the slightly lower rating of Ba3 – three grades from the investment level. It is hoped that this rating will be revised upwards in June.

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