Paraguay Achieves Investment Grade Status According to Moody’s

By BKM-BERKEMEYER

In a historic event for Paraguay, the credit rating agency Moody’s has upgraded the country's investment grade. This change reflects the stability of the country’s economic and fiscal conditions, sustained growth in recent years, and it's commitment to moving towards a green economy.

It's a recognition that allows Paraguay to attract more foreign investment, as investors often view credit ratings as an indicator of safety. This rating category can open doors to new financing and infrastructure projects that are crucial for economic development.

Paraguay is now well-positioned in the international capital markets, which means easier and cheaper access to capital, along with better conditions such as lower interest rates and longer terms. This will not only benefit large companies but could also generate new opportunities for small and medium-sized enterprises (SMEs).

Finally, with an improved credit rating, the cost of servicing public debt may decrease, allowing the government to invest in other underfunded sectors.

On July 26, 2024, Moody's Ratings upgraded the Government of Paraguay's long-term issuer and senior unsecured bond ratings to Baa3 from Ba1 and changed the outlook to stable from positive. It also upgraded the senior secured notes rating of Bioceanico Sovereign Certificate Limited, a government related entity to Baa3 from Ba1 and changed the outlook to stable from positive. The principal remaining credit risk related to Bioceanico arise from the credit

quality of the government of Paraguay, that is ultimately responsible for making the payments on the notes that the entity acquired.

“The upgrade of Paraguay's ratings reflects a combination of factors, including robust and sustained economic growth and our expectations that the economy has become more resilient to shocks, and a track-record of institutional reforms that has improved our assessment of institutional and governance strength. Successive governments have pursued a strategy of economic diversification and public investment in infrastructure, while preserving Paraguay's fiscal strength and increasing and diversifying the sovereign's access to market funding. Investment in infrastructure is

alleviating Paraguay's transportation bottlenecks that will support continued robust flow of private investment in non-traditional sector, including light manufacturing, forestry, and clean energy,” Moody's states in its report.

“The stable outlook reflects our expectations that economic growth will remain robust, supported by public and private investment in key infrastructure projects, mitigating risks related to Paraguay's exposure to commodity prices and climate-related shocks. We also expect the government will preserve Paraguay's fiscal strength, while efforts to reduce the share of foreign currency debt will reduce exposure to exchange rate risk, although most of the government debt will likely remain in foreign currency for the foreseeable future,” the report adds.