MercoPress. South Atlantic News Agency

Fitch upgrades Uruguay's rating

Uruguay Economy Ministry Azucena Arbeleche

Thanks to Uruguay's ”solid fiscal performance that allowed it to absorb the shock of the Covid-19 pandemic, added to the track record of compliance with the fiscal framework, which has improved its credibility, increased resilience to economic shocks and reduced the risk of a potential increase in the stock of public debt.

Fitch upgraded the South American country's rating from BBB- to BBB, it was reported Wednesday in Montevideo by Economy Ministry in a statement.

The company also highlighted the approval of the pension reform, as it understands that it improves the financial sustainability of the pension system, it added.

BBB is the highest rating ever granted by Fitch to Uruguay, since the agency started gauging the country in January 1995. The last rating upgrade by this firm was in March 2013.

Fitch thus joined other rating agencies such as Moody's and S&P, among others, which raised the country's rating as of March 2020.

The credit rating measures the level of risk involved in lending money to governments according to their economic conditions.

Fitch's was the third upgrade by international financial institutions that Uruguay has benefited from this year, and the fifth in the last 18 months.

The Uruguayan economy was once again recognized by one of the most renowned rating agencies in the world. This time, by Fitch, which followed the example of Standard & Poor's (S&P) and Moody's -as expected by authorities and economists-, and raised the country's rating one notch above the minimum, thus reaching the highest rating granted by this entity since it began measuring the country in 1995.

According to Fitch, Uruguay managed to “strengthen fiscal credibility, increase resilience to economic shocks and reduce the risk of a potential increase in the stock of public debt”.

Other elements highlighted by Fitch were the government's stable debt dynamics -although attention was drawn to its sensitivity to exchange rate movements-; robust external finances and the actions of the Central Bank of Uruguay (BCU) in terms of monetary policy.

Fitch was the last of the so-called “big three credit rating agencies” to endorse the Uruguayan economy -S&P and Moody's did so this year-; and also the last of the five rating agencies to upgrade its debt rating in the last 18 months (R&I in October and DBRS Morningstar in November).

In April the risk rating agency S&P also raised Uruguay's rating to BBB+, with a stable outlook, the highest credit rating according to that firm.