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Uruguay and Peru in line for a possible upgrading, according to Moody's

Monday, March 31st 2014 - 19:42 UTC
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Uruguay central bank with sufficient reserves to cover 18 months of debt payments plus contingent funds  Uruguay central bank with sufficient reserves to cover 18 months of debt payments plus contingent funds

Uruguay and Peru are the first Latin American countries in line for a possible credit rating hike by Moody's Investors Service, at a moment when sovereign upgrades are expected to become more scarce in the region, a senior analyst with the ratings firm said.

 Moody's currently has positive credit outlooks for four Latin American countries: Uruguay, Peru, Colombia and Jamaica. After assigning a positive or a negative outlook on a rating, the firm aims to make a decision on whether to adjust it within 18 months.

“Uruguay and Peru have had a positive outlook for a while, so we have to resolve what we are going to do,” senior Moody's analyst Mauro Leos said on the sidelines of the IADB meeting in a resort near the Brazilian city of Salvador, as reported in the Uruguayan media.

He said that Baa3-rated Uruguay, despite struggling with persistent high inflation and slowing economic growth, remains a low-risk country for bondholders due to its very comfortable gross financing needs.

“The government has very strong cash positions that allow it to cover up to 18 months of debt payments. Not only that, they also have contingency lines that give them another six months worth of debt payments,” Leos said.

As for Peru, currently rated at Baa2, Moody's is optimistic about the country's market-friendly policies and sound fiscal management that have ensured a decade of strong private investment and robust economic growth.

He said the ability to sustain an elevated growth rate is a key element in Moody's analysis of Latin America, especially at a time when external conditions that provided strong tailwinds to the region over the past decade become less supportive.

“We think we're coming to the end of that phase and, from now on, the challenges are more focused on preserving the progress that was made in terms of economic policies and pushing ahead with structural reforms,” Leos said.

Moody's, which assigned a positive outlook to Colombia's Baa3 rating last July, is optimistic about the Andean country's reduced fiscal deficits and consistent macroeconomic policies.

Still, the agency is not totally convinced that a 25 billion dollar infrastructure program unveiled by the government will be enough to boost Colombia's growth rates to a sustained pace of about 6% a year, as forecast by Finance Minister Mauricio Cardenas.

“It seems that they're getting their act together and they're maybe ahead of the pack, more so than Brazil definitely,” said Leos, referring to the country's ability to promote infrastructure investments. “Still, in terms of the medium term view, we're not as optimistic as the minister is.”

Leos acknowledged that sustaining growth rates of more than 5% a year would be a “game changer” for Colombia.

“If that is the case, that is something to be reckoned with,” he said, noting that such growth rates would put Colombia into to the league of fast-growing Latin American economies such as Panama and Peru.

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  • ChrisR

    So how does all this money in the bank square with “No Money Pepe” telling the judiciary there was no money to pay their wage increases AND he fucked the teachers over with their AGREED wage claim.

    Still 18 months of debt payment money will see this commie bastard out of the Presidency, hopefully for good.

    Mar 31st, 2014 - 08:22 pm 0
  • Anglotino

    Wage restraint is a good thing ChrisR. Or am I missing something?

    Mar 31st, 2014 - 11:09 pm 0
  • ChrisR

    @ 2 Anglotino
    “Wage restraint is a good thing ChrisR. Or am I missing something?”

    Living as you do in Australia with reasonable governments (ish) you may find it hard to get your head around the following, I know I did.

    Two very good friends of mine are teachers of many years experience and are dedicated to the education of those students in the final two years of their senior education. In the UK they would be on a joint salary of about US$160,000.

    I know what they get paid in Uruguay and it is low by any reasonable person’s view. They both have second jobs to make ends meet, they have NO rest time.

    TWO years ago this damnable Tupa run government we have agreed the years pay scale but then deferred it for 12 months. It seems they have done the same thing again and have not paid it this year. As far as education is concerned their wage constraint is nothing more than government contempt for the “educated” classes whilst they have awarded themselves vast rises to “govern us”.

    Pepe even came out and stated he had no sympathy with the teachers because they only work half-time. Nothing about all the other work they have to do in preparation, marking, etc. Pepe is of course semi-literate and fairly innumerate at best and together with all the original Tupas now in government positions did not finish his senior education.

    Contrast that with the worker’s unions. They dictate to the government what will be the settlement and go on strike even before the government has agreed, which I am told by many business people I know is usually the case.

    The economy for all of us is out of control. Inflation is really about 12% even for us retirees, someone paying rent and looking after their children it must be much higher. The social giveaway to the “poor” who have never worked at school and see no reason to work now Pepe is giving them money NOT to is damaging social cohesion big time. Wage restraint is a political tool.

    That is Uruguay for you under Pepe.

    Apr 01st, 2014 - 07:12 pm 0
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