Bloomberg News

Uruguay’s Credit Rating Returned to Investment Grade by S&P

April 03, 2012

Uruguay’s credit rating was raised one level by Standard & Poor’s, returning the Latin American country to investment grade for the first time in a decade.

S&P yesterday lifted Uruguay’s rating to BBB-, the lowest investment grade and in line with Colombia. The outlook is stable. Fitch Ratings and Moody’s Investors Service rate the country one level below investment grade.

“The upgrade is based on Uruguay’s sound economic growth prospects and improving external and fiscal indicators, as foreign direct investment strengthens and improves economic diversification,” Buenos Aires-based analyst Sebastian Briozzo said in a statement. “Prudent economic policies in recent years, backed by a broad political consensus, have allowed Uruguay to grow rapidly and reduce its main credit vulnerabilities.”

The country lost its investment grade rating in 2002 after neighboring Argentina defaulted on $95 billion of debt, sparking a run on bank deposits and a currency devaluation in Uruguay. S&P rates Argentina B, five levels below investment grade.

Economy Minister Fernando Lorenzo said the investment grade rating “will allow the country to better manage our liabilities.”

“We will continue to reduce vulnerabilities and ensure continuity of economic growth,” Lorenzo said in statements broadcast yesterday on national television in Montevideo.

The Uruguayan peso strengthened 0.1 percent to 19.5017 per U.S. dollar in trading yesterday. The currency has gained 2.3 percent against the dollar this year.

The yield on Uruguayan dollar bonds maturing in 2022 fell 2 basis points, or 0.02 percentage points, to 3.67 percent. The price of the securities rose 0.13 cent to 137.73 cents on the dollar.

“From a financial standpoint, we don’t expect significant changes as the market had already internalized this, as reflected in the rates of Uruguayan debt,” Vice President Danilo Astori said in a phone interview in Montevideo.

The upgrade was “long overdue” and will help Uruguay gain exposure among international investors, Astori said.

To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net

To contact the editors responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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