The vote on the constitutional reform in Peru “sets the path for a positive credit transformation of sovereign institutions” in that country, according to the risk rating agency Moody’s.
The analysis by Sergio Herrera Carranza and Jaime Reusche maintains that the bicameral reforms and immediate reelection “will introduce new checks and balances and political incentives,” which will be positive for the sovereign’s credit.
Moody’s said it expects that, once ratified, the amendments “will have a positive effect on Peru’s credit profile, particularly on the stability of its policies and its checks and balances.”
“Peru’s current “baa2″ institutional strength and governance score reflects its weakened political institutions, corruption, political discord and bureaucratic inefficiency, all of which the reforms seek to rectify,” the rating agency highlighted.
In addition, it noted that the reforms could also make the “ba” event risk score, which reflects the relatively high risk of political unrest due to ongoing political tensions and disputes, more susceptible.
Moody’s: Immediate reelection could perpetuate corruption
Moody’s believes that the constitutional reform “aims to curb the excessive power that Congress has gradually accumulated, “particularly as public disapproval of the institution reaches unprecedented levels.”
“Among other responsibilities, the creation of a review chamber would ratify high-ranking officials such as ambassadors, members of the central bank board and the country’s comptroller general,” says the document published this Wednesday.
However, Moody’s also warns that consecutive reelection “could inadvertently provide current lawmakers with a platform to perpetuate their power and potentially increase corruption and selfish actions, such as favoritism in policymaking or misuse of public funds.” .
“The change is designed to reduce the temptation for legislators to engage in corruption and encourage greater accountability to their constituents, as they would seek repeated re-elections,” he said.
Source: Larepublica
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