Moody’s lifted Paraguay’s credit rating by one notch to Baa3, the lowest investment grade, on Friday following the sovereign’s efforts to bolster its finances and its diversify economy.
The ratings upgrade “reflects a combination of factors, including robust and sustained economic growth and our expectations that the economy has become more resilient to shocks, and a track-record of institutional reforms,” the agency said Friday in a report.
Successive governments have followed a strategy of economic diversification and public investment in infrastructure, while preserving fiscal strength and broadening access to capital markets for funding, Moody’s said.
Farm exports such as soybean and corn and the sale of electricity from the giant Itaipú hydropower plant remain a mainstay of the Paraguayan economy, but the country has attracted increased private investment in sectors such as light manufacturing, forestry and value-added agriculture, said the ratings agency.
Moody’s changed the positive rating outlook to stable, which it said reflects its expectations growth “will remain robust, supported by public and private investment in key infrastructure projects, mitigating risks related to Paraguay’s exposure to commodity prices and climate-related shocks.”
Finance Minister Carlos Fernandez told LatinFinance in March that the country was on a firm path towards an investment grade rating. The sovereign was upgraded to BB+ by S&P Global in February, the agency’s highest speculative grade, in line with its rating from Fitch.
Fernandez said at the time that the government was also increasing the proportion of local currency debt issued, thereby reducing its exposure to exchange rate risk, a key requirements of the ratings agencies.