Peru Leads Investment Grade Race: Citi

Peru seems likely to hit investment grade first, followed by Brazil, while Colombia still has a way to go before being upgraded, according to Citi. However, the credit crunch is likely to delay the elevation to investment grade of the three, the shop say, citing presentations by S&P and Fitch. In order to be upgraded, Peru must cut net external public debt and continue diversifying its economy and in particular, exports. A reduction in poverty and the strengthening of public institutions is also required. Fitch says challenges facing Brazil before it can become investment grade include demonstrating an increasing resilience to general market turmoil, sustained improvement in investment rates, higher economic growth, improving the external debt and solvency ratios and showing progress with structural reforms. Colombia faces the highest hurdle to reaching high grade, according to Citi, citing S&P and Fitch. Colombia’s macroeconomic estimates for 2008 are close to or worse than the BBB median with the exception of the 5-year GDP growth rate.