A strengthening track record of sound macroeconomic policy, including an appropriate combination of fiscal, monetary, and exchange-rate policies; A strong commitment to fiscal responsibility, as evidenced by a gradual reduction in the public sector deficit to an estimated 1.5% of GDP in 2004 from 3.2% of GDP in 2000 despite a deteriorating political climate; An improvement in the country's external liquidity position, derived from both an increase in the level of international reserves and a positive adjustment in Peru's current account of the balance of payments, and; The recent deepening of the domestic capital market in local currency, which provides supplementary sources of financing for both the government and major corporations and diminishes the vulnerability to exchange-rate volatility. Still-evolving political
