US: Credit Market

Moody's Getting Bullish on Peru: Analysts

Moody's may upgrade its credit rating for Peru to "Baa2" within the next year, analysts at the ratings agency said. That would put it on par with countries like Brazil and Bulgaria.

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"A Baa2 rating would signify further advances within investment-grade territory, so the risk of default [on government bonds] is further diminished," said Jaime Reusche, assistant vice president and analyst at Moody's. "It would also reflect greater maturity of government institutions and their fostering an environment that is friendlier to investors overall."

In March, Moody's changed Peru's outlook from "stable" to "positive," signaling that in the next 12-18 months the country could attain Baa2 status.

But in early June, after the country elected former military commando and leftist candidate Ollanta Humala, views of the country's economic direction seemed more of a gamble.

Three months into his term, Humala's popularity is strikingly higher than most of his predecessors during their first months on the job — he received a 63-percent approval rating in local polls last week.

Now, the analysts seem confident in that March projection.

"The poll result is a credit positive as it encourages the government to maintain the current status quo and reduces the risk of fiscal slippage through more populist measures," Reusche and fellow analyst Renzo Merino, wrote in a credit report.

And since Humala has not yet altered the economic status quo of the last two decades, opinion polls serve as a vote of confidence for his centrist stance.

"The previous risk was that there might be a complete change in the rules of the game which might be unfriendly to investors," said Reusche. "The high approval rating curbs the temptation to go off on a more radical policy stance."