Peru-based development bank COFIDE has been experiencing faster-than-expected asset quality deterioration due to weakening infrastructure sector loans. Despite mitigating measures announced by the bank and explicit government support to buy up to 20% of Corporación Andina de Fomento (CAF) shares, we don't expect these measures to fully compensate for the provision requirements for the next two years affecting the bank's current capital levels. We also see increasing credit risk in its loans portfolio that could result in further asset quality deterioration. On the other hand, we're revising our expectations of extraordinary government support based on stronger evidence of government commitment to support the bank if financial stress persists. We're lowering our long-term issuer credit ratings (ICR) on COFIDE to 'BBB'
