Smoke Signals

First of all, risk rating agency Fitch Ratings, raised the rate of sovereign debt issued locally and the country ceiling to BBB-. In this sense, Fitch also elevated the rate of the Peruvian foreign debt from BB to BB+, a grade below the investment grade (BBB-). Thus, thanks to an orderly democratic transition, sustained economic growth and caution in the public expenses, Fitch has embedded in its rating what currently goes on in Peru.

This fact indicates that the Peruvian economy has good perspectives and that the government should entail this growth. Moreover, the direct benefit of this new qualification would be for the new private companies that already operate in the country because they will be able to get financing at better conditions, thus allowing them to compete better with other companies from the rest of the world.

However, this does not only mean that we should follow this good path, but also that we must double the efforts. It is a fact that Fitch, along with Peru, also raised the debt rating of other 40 countries, including Guatemala, El Salvador and Macedonia, which have already reached the investment grade of BBB-. Hence, despite Peru has a better position now, the world turns more competitive each passing day. Thus, all efforts oriented to reach the goal the sooner possible and in better conditions are the factors that are going to define Peru’s capacity to compete and attract more investments during the following years.

In this sense, the second “smoke signal”, the PTPA, is closely related to the first one, since it grants more previsibility to the country and increases investors confidence so that the trade flows and better investment conditions are guaranteed. Both of them are necessary goals in order to continue the sustained economic growth. Moreover, let’s not forget the fact that having a trade agreement with our main trading partner improves our competitive position in regards other countries and contributes to develop local market with more purchase power. As a matter of fact, Peruvian exports to the United States during the first semester grew more than those to other parts of the world (171% vs. 115%) and with new products being exported such as dried avocados, suits for women and children, etc. This as a source of formal jobs in the country also contributes to increase the purchase power of the people, which in turns make Peru a more attractive market for any investor no matter the origin of their capitals.

As a result, given the multiplier effect that the PTPA would have in Peruvian economy, it is inevitable to intensify all efforts towards getting its approval from U.S. Congress. After all, non traditional exports that are already sold to Americans depend on the preferences granted by the PTPA –which are going to expire at the end of the year-. Thus, we can not let pass by the potential gains of an agreement of such nature, or even worse, losing the benefits that we enjoy today. Definitely, a situation like the aforementioned would not be a good signal at all.