Peru: The ABC of investment grade*


Info provided by the
American Chamber of Commerce of Peru (AmCham Peru)


In the past days Peru has received much to its surprise and satisfaction the qualification of investment grade, given by the prestigious risk qualifying agency Standard & Poor´s, adding itself to the one given by Fitch Ratings in the recent past months, these plus the favorable development of our economy, are all contributing factors for the consolidation of the Peruvian image as an ideal destination for investments. Let me explain you how.

But first, it is necessary to remember that investment grade is nothing more than the reflection of the perception of international agents in reference to the capability of a country to pay its financial obligations on a timely fashion. And in a globalized world economically integrated, it is essential for investors to rely on accurate sources of information – like the ones issued by these risk qualification agencies - in order to take correct business decisions when choosing the destination of their investment and their capital.

In this manner, the diverse risk levels established by qualifying industries internationally renowned like Moody’s; Standard & Poor’s y Fitch Ratings, are huge especially for a country because they can determine the competitive financial interest rates that have the right impact to attract the right investments. In order for these qualifications to be issued, independently from individual methodologies, the agencies usually monitor the evolution of macroeconomic, political and institutional indicators, and proceed to classify the countries with debt in three big groups depending on the level of risk: investment grade, speculative grade and highly speculative grade. Hence, by being qualified as a country with investment grade, Peru now belongs to the category of countries that have better perspectives of payment and less risk, which in turn, opens a world of new possibilities before our eyes.

This important acknowledgement that only certain Latin American countries have, countries like Mexico, Chile and El Salvador, responds to the correct handling of the macroeconomic by several governments that knew to give continuity to an economic model based in fiscal and monetary discipline as well as market opening. Nevertheless, the aggressive pre-payment of the external debt done by the minister Carranza and the recent advances in trying to reduce poverty may be the reasons why our country has gained such recognition.

Therefore, dear reader, in spite of the happiness that these type of recognition gives us, it is important to admit that there is still an agency that not only doesn’t consider us at the state of investment grade but places us two steps down of such ladder, due to economic factors as the high level of dollarization of the economy, and others like the weakness of our institutions, which by the way, we should confront once and for all in order to increase our competitiveness as well as to consolidate sustained growth and abolish poverty and inequality.