Peru becomes an Investment Grade economy

The international credit ratings agency Fitch Ratings has elevated Peru’s currency debt rating to the investment-grade level of BBB- allowing it to join Chile as the only investment-grade economies on the South American continent.

Peru has enjoyed a booming economy in the past decade due partly to a surge in mining interests and an increase in infrastructure development. The economy grew 9 percent last year, the ninth consecutive year of growth. A similar expansion is expected for 2008.

Chile continues to boast an A rating – the highest in the region. In South America itself, Peru and Chile are followed by Brazil and Colombia who both hold a BB+ rating - just beneath investment grade.

Peru's Finance Minister Luis Carranza said on Wednesday that the upgrade to investment grade puts the Andean country "on the road to first world" status. Although the rating by Fitch is an important step, the country’s standing still hovers below investment grade with Standard & Poor and Moody's Investors Service.

The news also comes just months after a free trade agreement between Peru and the United States was finalized. According to the U.S. International Trade Commission the agreement will increase US export to the Andean nation $1.1 billion.

But, like many other countries in the region, Peru has struggled in recent weeks to grapple with the specter of inflation partially due to the rapid weakening of the US dollar.

Inflation accelerated to 1.04 percent in Peru last month, above the 0.5 percent median forecast, according to Bloomberg. That pushed annual inflation to 5.6 percent – the highest it has been in a decade.

That’s touches a particularly sore spot for Peruvian President Alan Garcia. He won last year’s election on the promise of economic stability but many remember that his first administration in the late 1980s ended with a financial catastrophe. When he left office in 1990 inflation had grown to more than 7,500 percent.