Peru calls for ‘urgent measures’ amid fear of losing investment grade

(Reuters) -Peru’s finance ministry on Thursday called for “urgent measures” after Fitch Ratings revised Peru’s credit rating outlook to negative on its recurrent political turmoil, adding it had put the country’s investment grade at risk.

Fitch said earlier on Thursday that a deterioration in political stability and government effectiveness had increased downside risks to the country’s ratings.

It affirmed Peru’s long-term foreign currency issuer default rating at “BBB,” just one notch above junk. A downgrade to a junk rating could affect the Andean nation’s access to and costs of borrowing.

Fitch said it expects the weakening of Peru’s political governance institutions will be difficult to reverse before the end of 2024, adding that “weaker governance poses greater downside risks to investment and economic growth” than the agency had expected earlier this year.

“The negative outlook requires urgent measures and consensus building to avoid the deteriorarion of the country’s credit rating,” the finance ministry said in a statement.

Peru’s weakened investment and economic prospects, if sustained over 2023-2024, could undermine its macro and fiscal trajectory in comparison to its “BBB” peers, Fitch added.

The agency added that the country’s high Cabinet turnover and two failed impeachment attempts have sustained “political tumult.”

Last week, Peru’s attorney general filed a constitutional complaint against President Pedro Castillo over “indications of a criminal organization” in his government.

Castillo, who already faces five criminal investigations, called the complaint a “coup d’etat.”

(Reporting by Carolina Pulice in Mexico City; Editing by Lincoln FeastEditing by Anthony Esposito, Matthew Lewis and Lincoln Feast.)