MercoPress. South Atlantic News Agency

Japanese rating agency ups Uruguay's grading

Arbeleche highlighted the new green bond will be tied to the government's environmental performance

Japanese risk rating agency R&I raised Uruguay's status from BBB to BBB+, the best grading the South American country has ever received, it was announced Friday.

Uruguay now stands two notches above minimum assessments and is in a better position than that recognized by Standard & Poor's (BBB), Moody's (Baa2), DBRS Morningstar (BBB-), and Fitch (also BBB-).

R&I spoke of “a greater likelihood that the structural reforms that the current administration has been working on in several areas will boost economic growth while maintaining the stability of the financial system.”

It also highlighted the government's attitude of putting the focus and momentum “on reforms that aim to accelerate economic growth and further improve fiscal sustainability in the medium term.”

“Uruguay's political and social stability is among the highest in South America,” the Japanese agency underlined.

Uruguay's Economy Minister Azucena Arbeleche celebrated the announcement during a conference in which she also addressed the issuance of green bonds for US$ 1.5 billion.

“This risk rating is important because of what we always say. Because having a good rating makes our financing cheaper in relative terms and therefore, we can allocate more resources not only to pay the debt but also to other areas that we understand are a priority for Uruguayans,” Arbeleche explained.

The minister also said that the bond was a “pioneer in the world” by indexing its interest rate to the result of its environmental performance.

R&I's grading and the bond “will allow us to benefit all Uruguayans, they are a support for greater investment, growth, and jobs, which is the ultimate objective of our economic policy,” she also noted.

Arbeleche stressed that the bond signals “the first time that an instrument ties the commitments of the Paris Agreement” to government performances that would otherwise entail no consequence for non-compliance. “It is the first time that finance and environment are intertwined,” she argued.

If Uruguay meets the goals of reducing greenhouse gases and conservating native forest areas, it will pay a lower interest rate, it was explained. It is the first time that a bond will “have a financing cost that is linked and indexed” as per the government's environmental performance.

“What Uruguay is showing with this innovative product is that really, as it was said from the beginning, the environment matters and that is why these objectives are set and have a concrete consequence if they are met or not,” Arbeleche pointed out.