The recent outlook revision on Standard&Poor's ratings on the Republic of Peru reflect expectations that the country's economic and fiscal profile will continue to improve over the medium term, despite a potential cyclical downturn in commodity prices. Favorable external conditions, as well as cautious macroeconomic management, have boosted GDP growth to around 4.5% per year (on average) since 2002 and kept fiscal deficits at around 1% of GDP. The increasing reliability of the country's monetary authority, which has met its inflation target for the past three years, has helped develop domestic debt markets and modestly reduced the high level of dollarization in the economy. A smooth transition to a new administration after the 2006 presidential elections could provide
