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LatinNews Daily - 02 September 2021

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In brief: Moody’s downgrades Peru

* International credit ratings agency Moody’s Investors Service has downgraded Peru’s long-term local and foreign-currency issuer and senior unsecured ratings from ‘A3’ to ‘Baa1’, indicating moderate credit risk. The outlook was changed from ‘negative’ to ‘stable’. Explaining the downgrade, a Moody’s statement highlighted that “a continuously polarised and fractured political environment has increased political risk and materially weakened policymaking capacity,” noting that “these conditions have adversely affected investor confidence and undermined Peru’s economic resilience.” Among the adverse conditions cited by Moody’s are: “lack of clarity on the new administration’s policies, controversial cabinet appointments, tensions between the executive and legislative branches, and growing tensions within the ruling [far-left Perú Libre] party. However, Moody’s said that Peru’s ‘stable’ outlook is due to the “expectation that Peru’s overall policy and institutional framework will prove effective in balancing underlying credit strengths and risks.” The statement notes that “abrupt policy shifts or institutional changes that foster policy or legal uncertainty would weigh adversely on Peru’s credit profile” and could lead to a downgraded outlook.