Uruguay Makes Case for Upgrade

Uruguay has matched its regional investment-grade peers in most indicators, its public credit director says, as it waits for the one-notch improvement from each of the 3 agencies that would bring it to investment grade territory. “We already have the fundamentals to be investment grade. We have had a thorough study of the methodology of the ratings using [the ratings agencies’] indicators, and what we end up with is a qualification that is quite different than what we have today. If we compare our indicators with a peer group of the region that has investment grade, I would say in most cases we are in the same situation and in some cases even better,” Azucena Arbeleche says, speaking at the LatinFinance IDB Breakfast this week in Montevideo. Among the remaining rating agency considerations are a need to see how Uruguay handles a future external shock, and concerns about the level of dollarization in its debt. “We don’t have to wait to see what happens if financial turbulence comes. We have been preparing ourselves for that scenario,” she says. Arbeleche also points out that last week’s $800m-euqivealnt liability management operation brought the country’s debt profile to just above 50%, rising rapidly from 11% in 2004. She adds that the sovereign will look to continue at this level. It does not rule out a dollar tap, but the focus will be on the local curve this year, in both peso-denominated and inflation-linked bonds. Uruguay is rated BB+/BB+/Ba1.