A strengthening track record of sound macroeconomic policy, characterized by high economic growth, low inflation, declining public debt, and current account surpluses; Strong growth prospects over the medium term supported by a diversifying economic structure; and A solid improvement in the country's external position, boosted by strong export growth. Still-evolving political institutions, in the context of significant economic, social, and ethnic fragmentation and high poverty; Limited fiscal flexibility, characterized by low revenue to GDP and high social needs constraining expenditure flexibility; and Monetary vulnerability, derived from a significant (albeit declining) level of financial dollarization. The ratings on the Republic of Peru (BB+/Positive/B foreign, BBB-/Positive/A-3 local currency sovereign credit ratings) are based on Standard&Poor's Ratings Services' expectation that strong
