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S&P lowers the outlook for Peru from stable to negative as a result of the political crisis

S&P lowers the outlook for Peru from stable to negative as a result of the political crisis
S&P lowers the outlook for Peru from stable to negative as a result of the political crisis

In recent weeks, Peru has experienced one of its worst political crises. Pedro Castillo, the president elected at the polls for the 2021-2026 term was vacated by the Congress of the Republic after having announced the dissolution of Congress unconstitutionally. For this fact, he is serving a preliminary arrest and is accused of rebellion and conspiracy, and the vice president Dina Boluarte sworn in as the new head of state.

This political crisis moved to the streets, and in different regions of the country there have been reports of social demonstrationseven acts of vandalism against public and private institutions, and in confrontations with police authorities has caused the death of seven people.

Now, this instability is reflected in the economy. Standard and Poor’s (S&P) Global Ratings He reported that has downgraded Peru’s credit rating outlook from stable to negative as a result of high political risk.

In addition, he indicated that maintains its current rating for Peruvian debt at BBB, the second lowest investment grade rating and the long-term rating in local currency at BBB+.

In a statement, the rating agency considered that this negative outlook “reflects the risk to the sovereign’s solvency due to the enduring political stalemate and the challenging relationship between the country’s executive and legislative branches.

“In our opinion, it also creates uncertainty about the institutional stability of Peru and its ability to maintain continuity in key economic policies and support economic growth”, it states in the document.

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It also noted that Pedro Castillo’s attempt to dissolve the Congress of the Republic and his subsequent dismissal “is the latest development in Peru’s longstanding political stalemate, which threatens to weaken the government’s ability to implement timely policies that support a solid private investment and economic growth.

S&P emphasized that if the stalemate continues or new political imbalances are registered, could mean one notch down your rating outlook. And he added that he could assess his perspective if the Peruvian political scenario maintains stability and continuity of key economic policies, including fiscal and monetary ones.

S&P maintains its current rating for Peruvian debt at BBB.
S&P maintains its current rating for Peruvian debt at BBB.

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On Monday, December 12, the Lima Stock Exchange (BVL) it closed its session with a global retreat of the dollar. The S&P/BVL Peru General Index, the most representative of the Lima stock market, fell 2.33% to 21,641.83 points.

These sectors presented losses during the day: services (-3.91%), electricity (-3.91%), financial (-3.65%), consumption (-2.87%), mining (-0.85 %), industrial (-0.81%) and construction (-0.33%).

Meanwhile, this Tuesday December 13the BVL General Index, the most representative of the local stock market, rose 0.61%, going from 21,641 to 21,773 points.

BVL opens higher.
BVL opens higher.

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