The ratings on the Republic of Peru (BB+/Stable/B foreign, BBB-/Stable/A-3 local currency sovereign credit ratings) reflect a comprehensive improvement in the country's economic indicators, and favorable medium-term prospects in the context of a more stabilized political and social situation. By year-end 2006, Peru will have had five years of economic growth averaging 5.5% (see table 1). More important, this growth performance was achieved within a strengthening macroeconomic framework characterized by low inflation, improved monetary institutions, current account surpluses, and a fiscal consolidation strategy resulting in declining debt levels. Most of Peru's historic vulnerabilities continue to show a declining trend, in particular its debt burdens (both internal and external) and its high level of dollarization (although still high at about 65%
