Moody’s downgrades Peru, citing “polarized and fractured political environment”
Sept. 1 (Reuters) – Rating agency Moody’s Investors Service downgraded Peru’s rating to “Baa1” on Wednesday, citing a “continually polarized and fractured political environment,” which it said has increased political risk and “dramatically weakened policy-making capacity “.
The outlook has changed from negative to stable, Moody’s said in a note.
Peruvian Congress on Friday confirmed a new left-wing cabinet appointed by President Pedro Castillo, allowing the fledgling administration to continue a program focused on higher social spending coupled with higher taxes for the mining industry.
Castillo took office a month ago after winning the presidency by a margin of just 0.25 percentage points against a rival candidate. Its far-left platform scared the markets, pushing the Peruvian Sol currency down to historic lows.
The Castillo administration has had a controversial first month, mired by allegations that some Cabinet members are aligned with a Maoist rebel group and a low 38% approval rate.
Instead, Castillo supporters say the cabinet represents historically marginalized Peruvians who do not come from the capital Lima.
Report by Kanishka Singh in Bengaluru; Editing by Sandra Maler