Andina

Moody's: Domestic capital markets mitigate credit risks in Peru

Moody’s

Moody’s

09:10 | New York (U.S.), Jun. 6.

The presence of deep domestic capital markets in Peru and a moderate share of non-resident domestic debt holdings denote features that mitigate credit risks in the Inca country, Moody's Investors Service affirms in its latest report.

According to the credit rating agency, this situation also applies to countries such as Brazil, Chile, and Mexico. 

In addition, the Governments of Chile, Colombia, Peru, and Uruguay rely on substantial holdings of foreign-currency liquid assets "that provide financial cover of their external debt servicing needs in the near term."

On the other hand, Moody's notes domestic interest rates in most Latin American nations —with the exception of Mexico— have been trending downward since last year, thus supporting domestic economic activity.

It adds "lower inflation trends allowed Central Banks to adopt an accommodative monetary policy stance."

Nonetheless, "recent downward pressures on local currencies and the potential effect on domestic inflation via pass-through effects could lead monetary authorities to consider rate hikes."

Moody's believes there is room for domestic interest rates to increase without materially affecting the short-term fiscal or economic outlook, bearing in mind these rates —throughout most of the region but excluding Argentina— are on average 200-300 basis points lower than last year.

The report also indicates "foreign reserve levels are high enough for most countries to provide a significant buffer against adverse external financial conditions."

In this sense, Moody's says several Latin American countries "strengthened their external financial positions and built up external buffers in the form of international reserves."

(END) NDP/JAA/MVB

Publicado: 6/6/2018