Tuesday, 3 March 2009

S&P Reaffirms It: Peru, Where 40% of Its Citizens Live With $2 or $3 a Day, is a First-World Country ... Uhhmm ...

Poor but happy? No, that's unfair

Brother blog Inca Kola News yesterday posted a note about contrasts in telecom data for big Latin economies, and mentioned something about Peru that both our blogs have been insisting on for a while: the definition of an investment-grade country is either an incomplete and biased set of information about the supposed creditworthiness of a country (it assesses non-payment risks for one creditor, but nor for others -- citizens and taxpayers are ignored) or simply crap.

In a market comment today,
Citigroup Inc. (one of the least creditworthy banks around the world these days) lauds Standard and Poor's decision to reaffirm Peru's investment-grade rating and stable outlook. Says Citigroup, citing S&P analyst Sebastián Briozzo, ''the government’s reaction to the global economic crisis has been appropriate, while the credit quality of the country’s assets has not showed any meaningful change.´´ The bank adds its assessment of the move: ''Positive: In our view, there is a rising probability that recently upgraded credits in Latin America may lose their investment-grade ratings in 2009. Nonetheless, we believe Peru is likely to maintain its investment-grade status unless the global recession extends beyond 2010, requiring additional government spending to contain social tensions.´´

''Social tensions´´ ... In a country where most people live on $2 or $3 a day social tensions are the rule, not the exception. Otto writes -- his post was about wireless phone penetration in markets seen as foes of capitalism: ''And what's that one coming up the rear? Oh yeah, it's that investment grade country ... y'know, the one with 40% of people living on $2 per day. The one that is made out to be the new spearhead of modern society.´´ If one policy in the crisis makes a government effectively responsive to it is the degree of importance it gives to reducing inequality and buffering an increase in poverty during times of ''financial stress.´´

Peru will continue to be a member of the first world for some people, but not for its citizens. That is bad.

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