Moody’s upgrades Uruguay’s investment rating.
Moody’s has upgraded Uruguay’s government bond rating to Baa2 from Baa3, and assigned a stable outlook to the Baa2 rating. It is now on the highest level of South American countries together with Brazil and Peru. Two important reasons for this upgrade are:
Uruguay’s orderly transition towards lower, albeit more stable, growth levels, which Moody’s anticipates will be supported by a steady increase in the investment ratio and productivity gains.
A decline in Uruguay’s exposure to regional shocks and an increase in its commodity diversification, thereby reducing the extent to which adverse events can affect the country’s sovereign credit outlook.
Uruguay remains exposed to regional economic and financial shocks — mainly in the form of economic links to Argentina, which will continue to weigh on the performance of the Uruguayan economy. However, the associated vulnerabilities are not sufficiently significant to materially affect the country’s credit rating on account of a much reduced exposure to the region as a whole, and Argentina in particular.
Moody’s also notes that, despite Uruguay’s relative commodity dependence, the country has been able to diversify its commodity base while simultaneously expanding its export markets. These attributes have enhanced the country’s resilience to commodity-related shocks. In this respect, Uruguay is favorably positioned in terms of concentration risk when compared with other commodity-producing countries.