Standard & Poor's elevó para Uruguay este 5 de junio las calificaciones de deuda en moneda local y extranjera de largo y corto plazo desde 'BBB-/A-3' a 'BBB/A-2'.
Uruguay ha demostrado ser resistente a las tendencias externas negativas en la región, manteniendo la estabilidad económica y un buen acceso a los mercados financieros internacionales, sostuvo la calificadora.
La perspectiva estable se basa en la expectativa de continuidad de las políticas económicas y una respuesta política oportuna y adecuada a los acontecimientos externos adversos potenciales, señaló en un comunicado.
Lea el comunicado (en inglés):
OVERVIEW
Uruguay has shown increasing resilience to negative external trends in the region while maintaining economic stability and good access to international financial markets.
We are raising our long- and short-term foreign and local currency ratings on Uruguay to 'BBB/A-2' from 'BBB-/A-3'. The stable outlook is based on our expectation of continuity in key economic policies and a timely and adequate policy response to potential adverse external developments.
RATING ACTION
On June 5, 2015, Standard & Poor's Ratings Services raised its long- and short-term foreign and local currency ratings on the Oriental Republic of Uruguay to 'BBB/A-2' from 'BBB-/A-3'. The outlook is stable. At the same time, we also revised our transfer and convertibility (T&C) assessment to 'A-' from 'BBB+'.
RATIONALE
The upgrade reflects two factors. The first is that we believe the newly elected administration of President Tabaré Vázquez will build on Uruguay's track record of cautious macroeconomic policies, gradual diversification of the economy, and prudent debt management. The second is that we believe the regional risks to Uruguay have stabilized and will improve next year.
The gradual diversification of the Uruguayan economy has contributed to recent years of high economic growth and has allowed the economy to weather the regional economic slowdown. High levels of foreign direct investment (FDI) contributed to higher GDP growth, economic diversification, and productivity gains. Although we expect that domestic fiscal tightening and contracting economies in Argentina and Brazil will keep Uruguayan growth below 3% this year and next, we do not foresee marked downside risks.
A significant improvement in Uruguay's external position over the past decade sustains the country's stability. We project that Uruguay has a narrow net external creditor position of 24% of its current account receipts (CAR) in 2015. FDI has consistently exceeded Uruguay's current account deficit, containing the country's external debt. Strong FDI has also contributed to an accumulation of international reserves that reached US$17 billion as of the end of 2014, or 32% of GDP.
During the past few years, Uruguay has taken steps to reduce the negative fiscal and external impact of droughts, which raise the country's energy import bill. The government has created a stabilization fund and purchased weather insurance to contain the fiscal cost of higher oil imports during periods of drought. Investments in renewable energy have already started reducing the country's dependence on oil imports. Renewable energy (hydraulic, wind power, and biomass) may provide almost half the country's energy in 2015.
Effective debt management has reduced the risks from a sudden disruption in external markets, or a spike in the exchange rate or interest rate. The government has undertaken liability management operations to improve the profile of sovereign debt by de-dollarizing its debt stock, as well as building reserves that provide cushion against external shocks. The central government faces a lumpy external amortization profile of US$1 billion, equivalent to 2% of GDP in 2015. As of March 2015, central government liquid assets covered 2.7x amortization payments due in one year. On Feb. 23, 2015, Uruguay reopened its global bond due in 2050 and issued US$1.2 billion in the international capital markets. The issuance raised foreign currency debt to 51% of total debt from 48% in 2014, but at the same time, it extended the average maturity of the debt to about 15.5 years.
A high level of dollarization and indexation to inflation limit the effectiveness of monetary flexibility. Deposits denominated in U.S. dollars are high at almost 80%, while credits in U.S. dollars reached 50% as of year-end 2014. The relative modest size of the financial sector, together with a highly liquid financial system, moderates the risks of currency mismatches. Nevertheless, a declining level of dollarization would reduce external vulnerabilities.
A persistently high inflation rate is the main macroeconomic weakness in Uruguay. Inflation ended 2014 at 7.8%, above the range limit set by the central bank. Anchoring expectations through clear communication and credible inflation targets, together with both fiscal and monetary contractive policies, would help moderate inflation going forward. Avoiding automatic salary indexation to past inflation would also lessen inflation inertia.
The consolidated public deficit widened to 3.5% of GDP in 2014 from 2.3% in 2013. We expect only gradual improvements in fiscal results given Uruguay's relatively high rigid spending (salaries, pensions, and social assistance) and limited flexibility to increase revenues. Economic growth reached 3.5% in 2014, driven by private consumption growth. The recent construction of a large pulp and paper mill (Montes del Plata) will boost output and exports in 2015. However, a combination of slowdown in Uruguay's main trade partners, along with a modest fiscal adjustment, will likely lead to a deceleration of economic growth to about 2.5% in 2015. We expect the current account deficit to be 4.4% of GDP in 2015 and gradually improve thereafter due to lower oil imports.
Uruguay's stable political system, growing middle class, and predictable economic policies should sustain economic growth close to its trend rate at 3%-3.5% from 2016 onward. Medium- and long-term economic growth will depend on the development of infrastructure, mainly ports, roads, and energy. Boosting different financing alternatives, such as public-private partnerships (PPPs) and concessions, would sustain investment. That, along with a more skilled labor force, would sustain long-term GDP growth.
We believe the Argentine economy, which still has ties to Uruguay's economy, will stagnate this year and begin to recover next year. We assume that the next government will gradually begin to address the country's macroeconomic imbalances, which in turn could moderate observed inflation and strengthen public finances. We expect that Brazil's economy, which has weaker links with Uruguay than does Argentina, will contract about 1% this year and return to low growth next year. A growing diversification of Uruguay's exports away from both Argentina and Brazil (thanks to rising exports of soya and pulp, as well as nontraditional service exports to global markets) has also reduced the country's vulnerability to economic setbacks in either neighboring country. Exports to Brazil and to Argentina were 18% and 4%, respectively, of total exports last year.
OUTLOOK
The stable outlook is based on our expectation of continuity in main economic policies over the next three years. The combination of cautious fiscal policy and higher-than-expected investment could accelerate GDP growth, gradually resulting in a lower debt burden and greater economic diversification. A declining level of dollarization in the banking system (the proportion of loans and deposits denominated in dollars), along with persistently lower inflation, would boost the effectiveness of monetary policy. A declining debt burden, together with an improvement in monetary and fiscal flexibility, could lead to a higher rating.
Conversely, we could lower the rating if we perceive a weakening commitment to fiscal and monetary policies that sustain economic stability, resulting in greater external vulnerability. Similarly, an inadequate or untimely government response to adverse external developments could reduce the country's external liquidity and raise its debt burden, leading to a downgrade.
