Standard & Poor’s downgrades Peru’s long-term sovereign rating due to political instability

Risk rating agency Standard & Poor’s Financial Services (S&P Global) Ratings updated Peru’s long-term sovereign rating outlook and went from stable to negative.

However, the agency maintained its long-term ratings in foreign currency and A- in local currency at BBB +, in a week marked by the dramatic decline in the price of the dollar after the Vásquez cabinet took office.

“We confirmed our long-term foreign currency ratings of ‘BBB +’ and Peru’s ‘A-‘ local currency, as well as our short-term local and foreign currency sovereign ratings of ‘A-2’. Peru’s transfer and convertibility risk assessment (T&C) remains at ‘A’, ”S&P said in a statement.

Similarly, S&P said that a fragmented political environment and a difficult social challenge due to the pandemic could “negatively affect Peru’s medium-term growth expectations and worsen its debt indicators.”

In this sense, he reported that there is at least a third of possibilities for Peru’s rating to continue to decline in the next six to 24 months “if political challenges, amidst tensions between the executive branch and Congress, contribute to a weak economic performance that worsens the sovereign’s financial profile ”.

“If prolonged political or political uncertainty, or possible adverse external events, erode investor confidence and limit expectations for medium-term GDP growth,” added Standard & Poor’s.

S&P: rating not lost for Peru

However, the rating agency assured that it could once again revise Peru’s sovereign outlook to stable in the next two years, as long as there is a stable and predictable policy consensus, as well as effective economic management to sustain the confidence of investors and companies. medium-term growth expectations.

“The political fragmentation after the recent elections has increased the risk of political uncertainty and has weighed on investor confidence,” he affirmed.