The ratings on the Republic of Peru are based upon the strengthening of its economic fundamentals and the expectation that these economic policies will be sustained in the future, despite continuing problems in the country's political environment. Implementation of a fiscal consolidation strategy has gradually stabilized Peru's debt burden. The country's successful fiscal strategy is essential in providing flexibility to an economy that is still severely constrained by a high external indebtedness, only limited margin for implementing monetary policy due to dollarization, and significant social needs. In addition, the combination of decreasing financing needs derived from lower fiscal deficits, rapidly growing exports, and increasing issuance of debt denominated in local currency has mitigated Peru's still-high external vulnerability. A high level
