Peru Seen Growing and Stable

Peru has robust fiscal and external solvency ratios, as well as high external liquidity, according to Fitch, which Wednesday affirmed the sovereign at BBB minus (stable). On the downside, the country has a concentrated export base, weak social and governance indicators relative to similarly rated peers and still high dollarization, the agency adds. But even though Fitch expects Peru’s growth to decelerate sharply to around 3.0% in 2009 from an estimated 9.8% in 2008, it will still be among the highest rates of growth in LatAm, the agency says. “Peru’s solid macroeconomic fundamentals have increased the economy’s capacity to withstand a commodity price collapse, a recession in the world’s advanced economies, as well as reduced capital and financial flows,” says Theresa Paiz Fredel, senior director for LatAm sovereign ratings at Fitch. Gross and net government debt/GDP ratios, at 24% and 15%, are below the 10-year BBB medians of 35% and 25%, respectively, the agency adds. “Even with the anti-crisis measures announced by the government late last year, which include a 2% of GDP economic stimulus package, and marked growth deceleration, Peru’s debt indicators will deteriorate only marginally and continue to compare favorably to BBB peers, while the downward trajectory of these ratios is expected to resume as the economy recovers in 2010,” adds Paiz Fredel. In addition, the average maturity of the government’s debt is longer than rating peers, minimizing roll-over risk, she adds.