Fitch upgrades Peru rating to BBB-plus; outlook stable

Reuters

NEW YORK, Oct 23 (Reuters) - Fitch Ratings on Wednesdayupgraded Peru's credit rating one notch higher intoinvestment-grade territory, crediting the country's fiscalbalance sheets and its record of growth and economic stability.

Fitch raised Peru's long-term foreign issuer default ratingsto BBB-plus from BBB, citing "continued pragmatism" underPresident Ollanta Humala's government and his "steady progresson reforms."

"Peru's upgrade is underpinned by the strength of thesovereign's external and fiscal balance sheets, continued growthoutperformance in relation to 'BBB' peers and a long trackrecord of macroeconomic and financial stability," the ratingsagency said in a statement.

The outlook is stable.

Fitch also upgraded the country ceiling to A-minus fromBBB-plus and the long-term local currency to A-minus fromBBB-plus.

Fitch's new rating for Peru, following an upgrade fromStandard & Poor's to BBB-plus in August, places the Andeancountry above Mexico and Brazil and only below Chile in theregion.

Moody's rates the country Baa2 with a positive outlook.

Peru, a top producer of copper, gold and silver, has overthe past decade enjoyed an average annual economic expansion of6.5 percent as exports have soared on China's growth anddomestic demand surged with the rise of the middle class.

Humala, a former military officer and one-time radicalelected two years ago on promises to make sure the poor benefitfrom the country's growth, has pleased investors by extendingthe free-market economic policies embraced by consecutivePeruvian presidents since the 1990s.

Last year the economy expanded by 6.3 percent, one of thefastest rates of growth in the region.

This year, however, the central bank expects GDP to expandby about 5.5 percent as softer demand from major buyers likeChina and weaker mineral prices have dampened the pace of growthand set the stage for Peru's first trade deficit in more than adecade.

Peru's potential growth rate, the pace at which the economycan expand without stoking high inflation, is usually seenbetween 6 percent and 6.5 percent.

"Despite the slowdown ... in 2013, Peru's economic growthperformance will be one of the strongest" among peers through2015, Fitch said. "The general government is on track to recordits third consecutive fiscal surplus (0.4 percent of GDP) in2013."

The Humala administration has vowed to keep cutting red tapeto boost mining output while also carrying out controversialstructural reforms to education and the civil service.

Finance Minister Luis Miguel Castilla has also tweakedfiscal rules to help the Andean country handle unexpectedrevenue swings related to its dependence on mineral exports.

Fitch said its upgrade assumes Peru will double its copperproduction by 2016 as expected, China's economy will grow by anaverage 7.2 percent through 2015 and that commodities will avoida slide into a lower price range.

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