The ratings on the Republic of Peru are supported by: Deepening macroeconomic stability; A strong commitment to fiscal responsibility; and An improving external liquidity position boosted by robust export growth. The ratings are constrained by: Still-evolving political institutions, in the context of significant economic, social, and ethnic fragmentation; External vulnerability (albeit declining), derived from a significant level of financial dollarization and still-high public-sector external debt; and Very limited fiscal flexibility, characterized by low revenue to GDP and high social needs that constrain expenditure flexibility. The outlook and ratings on Peru reflect expectations that the country's economic and fiscal profile will continue to improve over the medium term, despite the change in government and a potential cyclical downturn in commodity prices.
