HR Ratings assigned the long term rating of HR BBB+ (G) and the short term rating of HR3 (G) with a Stable Outlook to the foreign and local currency denominated sovereign debt of the Republic of Peru

Nov 05, 2015, 14:36 ET from HR Ratings

MEXICO CITY, Nov. 5, 2015 /PRNewswire/ -- The rating assigned to Peruvian sovereign debt is primarily based on the low level of sovereign debt currently outstanding, relatively strong GDP growth, low current levels of inflation, substantial international reserves and recent peaceful transfers of power to different presidents from different political parties; the last being accomplished with no dramatic changes in public policy that would affect the willingness and ability to comply with debt obligations. 

However, the rating was also negatively affected by the following factors: 1) the negative evolution over the last few years of the country's current accounts balance, 2) the sensitivity to changes in international commodity prices, 3) the history of hyperinflation and political instability during the 70's and 80's that resulted in a failure to fully comply with the servicing of debt, such as the agrarian bonds, 4) the substantial, albeit declining, dollarization of the economy, 5) questions concerning the viability of mining operations given important local opposition, 6) upcoming presidential elections, and 7) sensitivity to natural occurrences such as earthquakes and especially to weather phenomena, specifically El Nino.


GDP Real Growth

Nominal GDP (millions USD)

Primary Balance as share of GDP

Financial Costs as share of GDP

Next Debt as share of GDP

Current Account as share of GDP

























































Source: HR Ratings forecast based on data from the Peruvian Central Bank, IMF, Intracen, WTO, & MEF

  Among the factors that justify the assigned rating are:

  • Gross central government debt to GDP at only 17.0%, with net debt at approximately 5.8% (both for 2014). Our expectation is that debt to GDP will increase to 20.1% during our forecast period.
  • Strong recent GDP growth and the expectation that it will remain relatively strong at or above 4.0% from 2017 to 2022.
  • Inflation has remained tame and we expect that it will remain relatively subdued at around 3.5%.
  • Since the end of the Fujimori presidency there have been three successful democratic elections with winners from three different parties and the expectations that this will extend to four in 2016. These accomplishments have been accompanied by a successful return to international capital markets and a rebalancing of the public debt reducing both the absolute and relative size of external debt.
  • International reserves remain high at around 30.3% of GDP, although levels have been declining due to uncertainty in the global economy and in the international financial markets.
  • On the negative side, Peru's economy is significantly linked to the volatile mining exports. This sector is currently suffering from fallen prices as well as significant local opposition to mining operations, potentially limiting production despite major investments.
  • Despite the return to democratic government, favored by highly supportive international commodity prices, the legacy of a relatively recent past remains, although with time its relevance is declining: military rule during the '70s, hyperinflation in the '80s, default during both periods, significant human rights and other constitutional questions during the '90s, much of this related to widespread political violence.

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*HR Ratings de Mexico, S.A. de C.V. (HR Ratings), is a Credit Rating Agency authorized by the National Banking and Securities Commission (CNBV), registered by the Securities and Exchange Commission (SEC) as a Nationally Recognized Statistical Rating Organization (NRSRO) for the assets of public finance as described in clause (v) of section 3 (a) (62) (A) of the US Securities Exchange Act of 1934 and certified as Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA).

The rating was not solicited by the country or its government, or on its behalf, and therefore, HR Ratings has not received any fee for the issued rating. The following information can be found on our website at (i) The internal procedures for the monitoring and surveillance of our ratings and the periodicity with which they are formally updated, (ii) the criteria used by HR Ratings for the withdrawal or suspension of the maintenance of a rating, and (iii) the procedure and process of voting on our Analysis Committee.

HR Ratings de Mexico SA de CV (HR Ratings) ratings and/or opinions are opinions of credit quality and/or regarding the ability of management to administer assets; or opinions regarding the efficacy of activities to meet the nature or purpose of the business on the part of issuers, other entities or sectors, and are based exclusively on the characteristics of the entity, issuer or operation, independent of any activity or business that exists between HR Ratings and the entity or issuer. The ratings and/or opinions assigned or issued do not constitute an investment recommendation to buy, sell, or hold any instrument nor to perform any business, investment or other operation. The assigned ratings and/or opinions issued may be subject to updates at any time, in accordance with HR Ratings' methodologies.

HR Ratings bases its ratings and/or opinions on information obtained from sources that are believed to be accurate and reliable. HR Ratings, however, does not validate, guarantee or certify the accuracy, correctness or completeness of any information and is not responsible for any errors or omissions or for results obtained from the use of such information. The degree of creditworthiness of an issue or issuer, opinions regarding asset manager quality or ratings related to an entity's performance of its business purpose are subject to change, which can produce a rating upgrade or downgrade, without implying any responsibility for HR Ratings. The ratings issued by HR Ratings are assigned in an ethical manner, in accordance with healthy market practices and in compliance with applicable regulations found on the rating agency webpage. There Code of Conduct, HR Ratings' rating methodologies, rating criteria and current ratings can also be found on the website.

Ratings and/or opinions assigned by HR Ratings are based on an analysis of the creditworthiness of a country, entity, issue or issuer, and do not necessarily imply a statistical likelihood of default, HR Ratings defines as the inability or unwillingness to satisfy the contractually stipulated payment terms of an obligation, such that creditors and/or bondholders are forced to take action in order to recover their investment or to restructure the debt due to a situation of stress faced by the debtor. Without disregard to the aforementioned point, in order to validate our ratings, our methodologies consider stress scenarios as a complement to the analysis derived from a base case scenario


Republic of Peru

Long Term
Foreign Currency        HR BBB+ (G)
Local Currency            HR BBB+ (G)

Short Term
Foreign Currency                HR3 (G)
Local Currency                    HR3 (G)

Outlook                                   Stable



Guadalupe Espinosa
Corporate&Finance Communication
(+52) 55 5351 6585

Mariela Torres
Corporate&Finance Communication
(+52) 55 5351 6548



The rating assigned of HR BBB+ (G) indicates that the issue or issuer offers a moderate level of security for the prompt payment of sovereign debt obligations in the long term. Peru keeps a low credit risk, with a certain weakness in its capacity to pay in adverse economic scenarios. The "+" sign indicates a relative strength in the rating scale.

The rating assigned of HR3 (G) indicates that the issue or issuer offers a moderate level of security for the prompt payment of sovereign debt obligations in the short term. Peru keeps a low credit risk, with a certain weakness in its capacity to pay in adverse economic scenarios.

*HR Ratings de Mexico, S.A. de C.V. (HR Ratings), is a Credit Rating Agency registered by the Securities and Exchange Commission (SEC) of the United States as an NRSRO for this type of rating. HR Ratings' recognition as an NRSRO is limited to government assets described in clause (v) of section 3 (a) (62) (A) of the US Securities Exchange Act of 1934.