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Uruguay, Peru in line for a possible upgrading

Staff writer |
Uruguay and Peru are the first Latin American countries in line for a possible credit rating hike by Moody's Investors Service, a senior analyst with the ratings firm said.

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Moody's currently has positive credit outlooks for four Latin American countries: Uruguay, Peru, Colombia and Jamaica. After assigning a positive or a negative outlook on a rating, the firm aims to make a decision on whether to adjust it within 18 months.

"Uruguay and Peru have had a positive outlook for a while, so we have to resolve what we are going to do," senior Moody's analyst Mauro Leos said on the sidelines of the IADB meeting in a resort near the Brazilian city of Salvador, as reported in the Uruguayan media.

Mr. Leos said that Baa3-rated Uruguay, despite struggling with persistent high inflation and slowing economic growth, remains a low-risk country for bondholders due to its very comfortable gross financing needs. "The government has very strong cash positions that allow it to cover up to 18 months of debt payments. Not only that, they also have contingency lines that give them another six months worth of debt payments."

As for Peru, currently rated at Baa2, Moody's is optimistic about the country's market-friendly policies and sound fiscal management that have ensured a decade of strong private investment and robust economic growth.

Mr. Leos said the ability to sustain an elevated growth rate is a key element in Moody's analysis of Latin America, especially at a time when external conditions that provided strong tailwinds to the region over the past decade become less supportive. "We think we're coming to the end of that phase and, from now on, the challenges are more focused on preserving the progress that was made in terms of economic policies and pushing ahead with structural reforms."

Moody's is optimistic about the Andean country's reduced fiscal deficits and consistent macroeconomic policies. Still, the agency is not totally convinced that a 25 billion dollar infrastructure program unveiled by the government will be enough to boost Colombia's growth rates to a sustained pace of about 6% a year, as forecast by Finance Minister Mauricio Cardenas.

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