Nearshore Americas

Fitch Applauds Peru’s Fiscal Balance Sheet and Upgrades Rating

Fitch Ratings has raised Peru’s credit rating from BBB to BBB+, taking into consideration the Andean country’s stable fiscal balance sheet and the growing international demand for its energy and mineral resources. This comes barely two months after another American rating agency, S&P, upgraded Peru’s rating to BBB+.

The upgrade puts Peru above Brazil and Mexico, but the Andean country, which has been recording an average 6% GDP growth for the past few years, is still below Chile, another South American country known for copper mining.

Peruvian Minister of Economy and Finance Luis Castilla has expressed his happiness at the news, saying this will further cement the country’s status as ‘top investment destination.’

In a press release, the rating agency has praised President Ollanta Humala’s ‘pragmatic’ approach to attract private investment. Fitch also upgraded the country’s ceiling to A-minus from BBB+ and the long-term local currency to A-minus from BBB+.

Peru is the world’s third-largest copper producer and it earns billions of dollars exporting minerals to countries like China. Over the past decade, the Andean country has also exported a large amount of gold and silver, while the country’s middle class is expanding by the year.

The federal government is doing all it can to boost mining output and reform education and  civil service. Fitch expects the Andean country to double its copper output by 2016. It seems that rising copper output was the major reason for the rating agency to upgrade Peru’s ratings. Peru’s growth is, however, dependent on China’s economic growth. This Asian giant is predicted to grow by an average 7.2% through 2015.

Unlike several other countries in the region, Peru has successfully distributed its wealth among its citizens and the country has continued to embrace free-market economy to create jobs.

Mineral export has helped the country boost savings and pay back debt. Therefore, Peru is less vulnerable to external shocks such as a drop in export revenue, analysts say.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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