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Moody’s raises Uruguay’s credit rating to Ba1, one level below investment grade

Friday, January 27th 2012 - 11:05 UTC
Full article 11 comments
The Central bank reduced debt by extending maturities and decreasing share of foreign currency denominated bonds The Central bank reduced debt by extending maturities and decreasing share of foreign currency denominated bonds

Uruguay’s credit-rating outlook was raised on Thursday to positive by Moody’s Investors Service, which cited the government’s commitment to keeping its budget deficit in check.

Moody’s raised Uruguay’s outlook from stable 13 months after lifting the rating to Ba1, or one level below investment grade.

“A steady improvement in Uruguay’s sovereign credit profile as a result of a strong and continued commitment by the government to fiscal discipline, a condition that has led to moderate deficits and declining debt metrics,” wrote Mauro Leos, a Latin America sovereign credit analyst for Moody’s Investors Service, in a report.

“Along with a better capacity to administrate adverse financial and economic conditions, the profile of the Government’s credit has improved gradually but steadily, thus getting closer to the line that the sovereign countries with the highest ratings have,” Moody’s added.

Yields on government dollar bonds due in 2022 fell 4 basis points, or 0.04 percentage point, to 3.94% and the extra yield investors demand to hold Uruguayan bonds instead of US Treasuries rose 3 basis points to 210. That’s less than some investment-grade countries including Peru, Russia, and Poland.

The Uruguayan government reduced its debt by extending average maturities and decreasing the share of foreign currency- denominated debt, according to the report.

Fellow credit rating agencies Standard& Poor’s and Fitch maintain a similar rating with Uruguay -BB+- with stable panoramas.

Moody’s lowered Uruguay’s rating to Ba2, two levels below investment grade, in 2002 because of the spillover from neighboring Argentina struggling in the aftermath of its record default.

Top Comments

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  • ChrisR

    The biggest problem that Uguguay needs to tackle is the huge fiscal drag on the working economy caused by the very high level of public employees in respect to the private sector. Also the thinking of the finance minister that the public owned utilities can fix their cost rations by putting their prices up!

    The latter concept belongs to the economics of the madhouse.

    Getting rid of public headcount WHILST at the same time retraining the people involved into PRODUCTIVE work is the only way Uruguay can break out of the mindset that the state can do everything. It may be able to do everything BUT IT WILL NOT BE AS EFFICIENT AS THE PRIVATE SECTOR.

    Jan 27th, 2012 - 02:35 pm 0
  • rylang23

    @ #1 - Chris... I am always concerned when I hear that the only way for a country to be healthy and happy is to have increased productivity and efficiency, and only from the private sector. The US is highly productive and efficient (those who have jobs), has a seriously diminishing public sector, and yet is experiencing a depression. You seem absolutely certain that the (so called) free market is all its cracked up to be. I am a skeptic.

    Jan 27th, 2012 - 08:25 pm 0
  • AleM

    @rylang23 the US has a diminishing public sector??? Are you sure? CrisR is right about the HUGE and inefficient public sector in Uruguay.

    Jan 28th, 2012 - 06:12 am 0
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