Latin America

Political turmoil takes its toll and Moody’s downgrades Peru

Peru saw its sovereign debt rating slip to Baa1 amid seemingly never-ending political crises. Presidential elections were tipped to bring calm, but controversy remains rife under Pedro Castillo

Political turmoil takes its toll and Moody’s downgrades Peru
Woman in Cuzco street. Photo: Maphke/Shutterstock

Credit rating agency Moody’s downgraded Peru’s sovereign debt rating from A3 to Baa1, following months of continuous political turmoil. The current crisis began with President Martín Vizcarra’s impeachment last year, leading to a highly polarized election environment and constant clashes with the newly instated Pedro Castillo administration.  

“The downgrade to Baa1 from A3 reflects Moody’s view that a continuously polarized and fractured political environment has increased political risk and materially weakened policymaking capacity,” wrote the agency. Baa1 is still considered investment grade. 

When Mr. Vizcarra was impeached in November 2020, the country had an astonishing three different presidents...

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