The Peru EMBIG spread (country risk of Peru) fell by 2 basis points to 193 basis points, while the Latin America EMBIG spread increased by 2 basis points to 410 basis points between April 12 and April 20, reported the Central Reserve Bank (BCR).
According to the BCR, the upward pressure in the region is explained by the outlook for weaker global growth, expectations of an increase in Federal Reserve interest rates and the escalation of war tensions between Russia and Ukraine.
This trend was limited by epidemiological factors associated with COVID-19 (fewer infections and restrictions) and rising commodity prices.
Country risk measures a country’s ability to meet its financial obligations and the implied political risk and, on this basis, receives an international credit rating.
The main consequences of high country risk are lower foreign investment and lower economic growth, which could lead to unemployment and low wages.
It is an orientation index for investors, because it indicates that the risk of doing business in a country is higher or lower.
It should be noted that the higher the risk, the less likely projects are to achieve a return in line with the funds; and the lower this index, the more attractive the country will be for investors.
The index is measured based on the difference between the spread between Peru’s sovereign bonds and the yield on US Treasury bonds.