At the end of July this year, Paraguay joined the exclusive group of South American countries with an investment-grade rating after Moody’s assigned the country a credit rating of Baa3 with a stable outlook. With this inclusion, Paraguay becomes the fifth country in the region to achieve this level, alongside Chile, Peru, Uruguay, and Colombia.
Obtaining “investment grade” improves international perception of the Paraguayan economy and will significantly boost foreign investment in South America in the coming years. Additionally, this rating helps maintain solid and sustained economic growth.
CHILE
The results of the countries in the region with investment-grade ratings reinforce the importance of this category. A standout example is Chile, which, since achieving this rating in the early 1990s, has attracted more than USD 307.2 billion in foreign investment in South America, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC).
Breaking down the figures, between 1991 and 1995, Chile accumulated USD 1.667 billion in foreign investments, which increased to USD 5.667 billion between 1996 and 2000. Later, between 2003 and 2007, investments totaled more than USD 39 billion, with an annual average of USD 7.8 million.
The period from 2008 to 2012 marked a notable increase, reaching USD 105 billion, with an average of USD 21 billion per year. Between 2013 and 2017, the figure moderated to USD 85 billion, representing an annual average of USD 17 billion.
Finally, between 2018 and 2022, investments totaled USD 55 billion. It is worth noting that in 2023 alone, Chile attracted more than USD 21 billion in foreign investment in South America in a single year.
On the other hand, it is worth mentioning that in June 2024, Moody’s decided to maintain Chile’s rating at A2 with a stable outlook, supported by the country’s institutional strength, governance, and solid fiscal position. For its part, S&P assigned Chile a rating of A with a negative outlook, while Fitch maintained a rating of A- with a stable outlook.
PERU
Peru, for its part, achieved investment-grade status in 2008. Since then, in more than 15 years, the country has received over USD 82 billion in foreign investment in South America, according to ECLAC.
Breaking down the figures, between 2008 and 2012, Peru accumulated more than USD 43 billion in investments, with an annual average of USD 8 billion. Between 2013 and 2017, investments totaled more than USD 35 billion, which equates to an annual average of USD 7.1 million.
Between 2018 and 2022, foreign investment reached approximately USD 34 billion, with an annual average of USD 6.8 million. Finally, in 2023, Peru attracted more than USD 3.9 billion in a single year.
Regarding Peru’s current rating, in April 2024, S&P downgraded its sovereign rating from BBB to BBB-, maintaining a stable outlook. This decision was motivated by the growing political uncertainty in the country, marked by the tense relationship between the executive and legislative branches.
For its part, Moody’s maintains Peru’s rating at Baa1, while Fitch rates it at BBB, both with negative outlooks.
COLOMBIA
Colombia regained its investment-grade rating in 2011, and since then, in more than 12 years, it has accumulated over USD 178 billion in foreign investment in South America.
Breaking down the figures, between 2011 and 2015, Colombia attracted more than USD 73.79 billion in investments, with an annual average of USD 14.758 billion. Between 2016 and 2020, foreign investment revenues totaled more than USD 61.633 billion, representing an annual average of USD 12.3 billion.
ECLAC data shows that in the last three years, from 2021 to 2023, foreign investments in Colombia reached USD 43.8 billion, with an average of USD 14 billion per year.
Colombia has a rating of Baa2 with a stable outlook from Moody’s. S&P, for its part, assigned it a rating of BB+ with a negative outlook, while Fitch rated the country at BB+ with a stable outlook.
It is worth recalling that in January 2024, S&P changed the outlook from stable to negative, maintaining the rating at BB+ due to moderate economic growth expectations.
URUGUAY
Uruguay regained its investment-grade rating in 2012, and since then, in more than 12 years, it has attracted over USD 31.5 billion in foreign investment in South America.
Breaking down the figures, between 2012 and 2016, Uruguay accumulated more than USD 13.619 billion in investments, with an annual average of USD 2.7 billion. Between 2017 and 2021, foreign investments totaled more than USD 9.8 billion, which equates to an annual average of USD 1.96 billion.
In the last two years, from 2022 to 2023, foreign investments in Uruguay totaled USD 8 billion, although a decline was recorded last year, according to ECLAC data.
On the other hand, Uruguay has a rating of Baa1, which is a stable outlook from Moody’s. S&P, for its part, assigned it a rating of BB+ with a stable outlook, while Fitch rated the country at BBB with a stable outlook.
It is worth mentioning that in December 2023, the rating agency Moody’s confirmed Uruguay’s rating at Baa2, improving the outlook from stable to positive. However, in March 2024, Moody’s decided to upgrade the rating from Baa2 to Baa1, changing the outlook to stable. This decision was due to solid institutions supporting the implementation of structural reforms and the continued adherence to fiscal and monetary policies, pointing to higher sustained growth rates than in previous periods.
Thus, Paraguay’s now-investment-grade rating opens up a great opportunity to attract more foreign investments, as seen in countries like Chile, Peru, Colombia, and Uruguay.
Maintaining this rating can drive the country’s economic growth and strengthen international confidence. This improves Paraguay’s image in global markets and places it in a favorable position to receive investments that will help achieve more robust economic development in the coming years.
Paraguay’s achievement of an investment-grade rating marks a significant milestone in the nation’s economic journey, positioning it alongside regional peers such as Chile, Peru, Colombia, and Uruguay. The experiences of these countries demonstrate that maintaining such a rating can catalyze substantial foreign investment in South America, fostering long-term economic growth and stability. For Paraguay, this newfound status presents an opportunity to attract capital inflows that could bolster infrastructure, create jobs, and drive innovation, further solidifying its economic foundation. However, sustaining this rating will require a continued commitment to sound fiscal policies, political stability, and institutional reforms. By learning from the successes and challenges of its neighbors, Paraguay can leverage this moment to ensure a prosperous future, enhancing its role in the global economy and improving the lives of its citizens.