Real Money Awaits Next Peru Promotion

It may take a while before investment grade-only investors start piling into Peruvian assets en masse, since most need another endorsement. “Many investors will still need an upgrade from a second ratings agency in order to invest in Peru,” says the head of strategy at a leading US-based shop, adding that the ability to allocate depends on each fund’s covenants. S&P has Peru at BB+, one notch below investment grade, while Moody’s rates it Ba2, two notches below. Fitch yesterday upgraded Peru to BBB minus. S&P is likely to raise Peru in the next 12 months, says Goldman, which notes “the upgrade to investment grade is likely to attract additional investment inflows into Peru in terms of both FDI and portfolio inflows, increasing the already strong pressures for the PES to appreciate.” One tangible benefit for Peru should be increased stability as it lures a higher class investor. “From a risk-reward point of view, it will become a less volatile country because of the nature of the investors that will be entering [the bonds,]” says the head of strategy at the Wall Street firm.