Peru: credit rating upgraded

As the US and Japan experience credit rating downgrades, a Latin puma leaps forward.

Admittedly, the US was downgraded in early August from platinum-plated AAA to AA+ by credit-rating agency Standard & Poor's. But this was historically unprecedented, embarrassing and costly.  Later last month another agency, Moody's, downgraded Japan due to what Bloomberg reported as "“weak” economic growth prospects, frequent changes of government that prevent long-term budget planning, and a build-up of debt." Japan dropped one notch to Aa3, equivalent to an S&P rating of AA -.  Now, this month Standard & Poor's upgraded Peru from BBB - to the healthier investment grade of BBB. This new rating places Peru on a par with Russia, Mexico, Kazakhstan or India.

Peruvians are experiencing something of a boom, unlike the Americans or Japanese. S&P moved on Peru last Wednesday in recognition of newly-elected "President Ollanta Humala’s decisions during the first month of his administration" claimed the Peruvian Times.  The decision to upgrade was "based on (S&P's) outlook that Peru will maintain its strong economic growth thanks to pragmatic and flexible government policies", the paper states. The World Factbook notes "Peru has continued to attract foreign investment," which is unsurprising. 

Peru is the twentieth largest country by area on the planet, bigger than either South Africa or Egypt. Its 29.5 million people account for a greater population than Malaysia or Australia. So, the Latin American has good potential from critical mass, and is surrounded by growing economies like Chile, Argentina, Brazil and Mexico. Peru has links further afield, with the US, China, the EU, Switzerland, Canada and Japan as its most productive trading partners. Its a also full member of key Pacific trade clubs APEC and TPP, and an associate member of Mercosur, a Latin group.

Peruvian exports, notes World Factbook, include:
  • metals and minerals (copper, gold, zinc, tin, iron ore, molybdenum)
  • fossil fuels and their p(petrol, natural gas)
  • soft commodities (coffee, potatoes, asparagus, fruit)
  • feed supplements (fishmeal)
  • manufactured products (apparel and textiles).
Imports include:
  • petroleum and petroleum products
  • chemicals
  • plastics
  • manufactured goods (machinery, vehicles, colour TVs, power shovels, front-end loaders
  • telephones and telecommunication equipment
  • metals (iron and steel)
  • soft commodities (wheat, corn, soybean products, paper, cotton)
  • vaccines and medicines.
Peru's improved creditworthiness will boost its economy enabling increased investment and better borrowing capacity: vital to raise GDP per head, currently low at US$9,200, equivalent to that of Tunisia or the Cook Islands.

Ollanta Humala was elected last July. A 49-year old left-winger and son of a labour lawyer, he will no doubt press to raise living standards during his Presidential term. His task will be eased by Peru's consistent growth rate, forecast to be 5.82% next year by EconomyWatch, a Singapore-based online economics community. If Peru achieves that pace it'll be the fastest puma in Latin America. 

The country's economy is no longer a tiddler.  With a GDP (PPP) of US$275bn it's bigger than the Czech Republic and, at that level, Peru is nudging stella-performing southeast Asian tiger Vietnam.

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