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LatinNews Daily - 19 October 2021

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In brief: Fitch downgrades Peru

* The international credit ratings agency Fitch Ratings has downgraded Peru’s long-term foreign currency issuer default rating (IDR) to ‘BBB’ from ‘BBB+’, maintaining its outlook as ‘stable’. Fitch explained that the downgrade “reflects the steady erosion over time of Peru’s sovereign balance sheet and other key rating metrics, as a result of a series of shocks” (most notably the coronavirus [Covid-19] pandemic), which have driven Peru’s government debt ratio to a significantly higher level than in 2013, when Fitch upgraded the country to BBB+. Fitch also highlighted the current volatile political situation, noting that President Pedro Castillo’s government has advocated policies that “appear in conflict with the investment-driven and market-oriented, open economic model.” However, Fitch noted that Castillo’s 6 October cabinet reshuffle has calmed the waters, “pivoting away from more radical positions on macro policy orientation and the rule of law, and could improve relations with congress.”