Peru country risk declines, remains lower than regional average

Peru’s country risk indicator, measured by the EMBIG Peru spread, fell in average terms in the week of July 7-14, remaining below the regional average, the Central Reserve Bank of Peru (BCR) reported Saturday.

 

According to the BCR Weekly Economic Report, the country risk indicator fell from 189 to 176 basis points.

 

On the other hand, the EMBIG LatAm spread dropped 9 basis points amid a deal between Greece and its creditors; and the Chinese stocks stage recovery.

 

The country risk measures the ability of a country to meet its financial obligations and the implicit political risk, and based on that, the country receives an international credit rating.

 

The main consequences of a high country risk are a drop in foreign investment and lower economic growth which could lead to unemployment and low wages.

 

This is an orientation index for investors, because it indicates that the risk of doing business in a country is more or less high.

 

It should be noted that the higher the risk, the less likely projects obtain a return in accordance with funds; and the lower this index is, the more attractive the country will be to investors. 

 

The index is measured based on the difference between the spread of Peru sovereign bonds over yield of U.S. Treasury bonds.