S&P Global cuts Peru's outlook to negative on heightened political risk  

 

• On Dec. 12, 2022, S&P Global Ratings revised the outlook on its long-term ratings on Peru to negative from stable and affirmed the 'BBB' long-term foreign currency and 'BBB+' long-term local currency sovereign credit ratings, as well as the 'A-2' short-term foreign and local currency sovereign credit ratings.
• The negative outlook reflects the risk to the sovereign's creditworthiness from the enduring political standstill and challenging relationship between the country's executive and legislative branches of government. Former President Pedro Castillo's recent attempt to dissolve Congress and his subsequent ouster from office is the latest development of Peru's long-standing political impasse, which threatens to weaken the government's capacity to implement timely policies to support robust private investment and economic growth.
• S&P could lower the ratings by one notch if a prolonged political impasse or further adverse developments reduce the predictability of policymaking or worsen institutional stability, auguring badly for economic policy outcomes.
• On the other hand, the rating agency could revise the outlook to stable over the next two years if Peru makes progress on reducing the heightened political uncertainty and maintaining continuity in key economic--including fiscal and monetary--policies. A timely reduction of the uncertainties created by recent developments, along with prospects of greater stability in governance and solid economic policies, could sustain the current sovereign credit rating.

(Source: S&P Capital IQ