NEW YORK (Reuters) - Latin America has withstood economic shocks so well during the global crisis that Brazil, Colombia and Peru could see their credit ratings raised to investment grade within 12 months, Mauro Leos, a senior credit officer at Moody’s Investors Service, said on Wednesday.
Moody’s already has lifted the sovereign credit ratings of other countries in Latin America during the worldwide downturn — Uruguay in January and Chile in March.
Moody’s also put Chile on positive outlook for another boost to its investment grade rating, the region’s highest, Leos told the Reuters Latin American Investment Summit in New York.
When Latin America was booming during the record surge in commodity prices, Moody’s took a cautious stance knowing that the good times would not last forever, said Leos, who oversees credit ratings for 12 Latin American countries.
“Now we are acting counter-cyclical,” he said. “We do not rule out the possibility that we are going to upgrade other countries,” he said.
Moody’s has based its thinking on how well the region, long prone to steep downturns when commodities prices went south or overvalued currencies blew up, has held up during the current crisis, which was sparked by a bust in the U.S. housing market.
“There is resilience in the region. And the resilience has to do with the actions of the countries on the fiscal side, on the monetary side,” Leos said.
Countries that could be upgraded are ones that are just below investment grade that have been doing better than expected, Leos said.
“Among those countries you have Brazil, you have Peru, possibly Colombia. Those would be the potential candidates for upgrades,” he said.
Brazil and Peru already are ranked investment grade by both Fitch Ratings and Standard & Poor’s.
Leos said Moody’s doubts long-planned reforms the Mexican government would like to see pass in Congress will bear fruit. He also is concerned about the country’s fiscal accounts because of heavy reliance on oil and a small tax base.
The inability of Mexico to improve its fiscal profile has long been a challenge for the country, and Moody’s holds out so little hope of improvement in the near future that Leos said he wondered when the situation could wear on its credit rating.
“It is clearly an issue that we have been following for a long time. All I can say at this point is that we are looking at it very closely and we’re trying to measure the credit impact,” he said.
“The more time passes, the more challenges become risks and eventually that starts to have an impact.”
However, Mexico’s structural issues are counterbalanced by the country’s ability to issue long-term debt and go to the markets even in trying circumstances to raise funds, he said.
Mexico was the first emerging market to tap capital markets in December after credit dried up following the collapse of Lehman Brothers in September.
“They have market access and in that respect they’re different from almost everyone else. They were able to access market at a critical point,” Leos said.
Reporting by Herbert Lash, additional reporting by Daniel Bases, Walter Brandimarte and Juan Lagorio, editing by Matthew Lewis