The Standard & Poor's (S&P) rating agency Thursday raised Paraguay's grading from BB to BB+ after 10 years, Economy Minister Carlos Fernández Valdovinos announced. The news represented one more step towards obtaining an investment grade rating (a low risk of non-payment of debts), he also explained on social media.
Fernández Valdovinos insisted that the new rating represented more opportunities for investment and economic growth, as well as greater investment confidence in the country's economy and access to better financial conditions.
In December last year, Moody's kept Paraguay's rating at Ba1 with a positive outlook at the close of the 2023 annual review. Moody's and Fitch Ratings place the country one notch below investment grade, and S&P Global Ratings two notches below.
S&P's new grading reflects Paraguay's sustained economic growth and fewer risks for the government to achieve debt stabilization amid a positive macroeconomic outlook coupled with an oversupply of renewable energy which heralds growth and gradual economic diversification.
Paraguay's ratings remain constrained by evolving institutions and a weaker monetary transmission mechanism than its peers, S&P also noted as the South American country's economy is projected to grow 3% from 2024 to 2027.
The administration of President Santiago Peña is promoting measures such as laws on pensions and civil service which could lead to improved gradings, Fernández Valdovinos also pointed out. The government now plans to sell a 12-year dollar bond and is considering a local currency issue abroad, joining Chile, Jamaica, and the Dominican Republic, which made similar sales last year.
Slowing inflation has allowed authorities to cut Paraguay's interest rates by 200 basis points to 6.5% since August, and analysts surveyed by the central bank expect a further 100 basis point decline by the end of 2024.
Similarly, the government is also considering its first sale of environmental, social, and government bonds, Fernández Valdovinos also said.