S&P rates Peru bonds BB-

Standard & Poor's said it assigned its BB- foreign currency rating to the Republic of Peru's $500 million senior unsecured bond issue due 2016.

S&P also affirmed its BB+ long-term local currency and BB- long-term foreign currency sovereign credit ratings on Peru as well as its B short-term ratings.

The outlook is stable.

The $500 million issue completes the government's planned external issuance for 2004. The government's financial program incorporated a total of $1 billion from international capital markets, but $500 million was prefinanced at the end of 2003.

"Peru's macroeconomic fundamentals continue to strengthen despite President Toledo's and Congress's low levels of popularity," said S&P credit analyst Sebastian Briozzo.

Improvements are supported by a fiscal consolidation strategy that has gradually reduced the country's public-sector deficit to an estimated 1.5% of GDP in 2004 from 3.2% in 2000. Fiscal consolidation - in the context of fairly robust economic growth - has stabilized Peru's relatively high debt burden at about 46% of GDP and will create the basis for reducing this ratio.

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