Just a few months ago Peru looked a shaky bet for international investors. Now bondholders can breathe a little easier. Peruvian president Alejandro Toledo still has the lowest popularity rating in Latin America and economic growth is slowing but Peru's macroeconomic fundamentals are solid and in keeping with IMF demands. It all looked very different in mid-January. Spreads on Peru's debt widened by more than 100 basis points as investors wondered whether Toledo's two-and-a-half-year-old government was on its way out amid corruption scandals. Four ministers lost their jobs in just three months and Toledo, who has a popularity rating of just 9%, struggled to distance himself from corruption scandals.
But a cabinet reshuffle in February calmed bondholders' nerves. It brought in seven independent ministers, and it brought back fund manager and Wall Street darling Pedro Pablo Kuczynski as finance minister. He had held the same post in Toledo's first cabinet between July 2001 and July 2002. "I
am committed, as I always have been, to sound fiscal policies," said Kuczynski, on taking office.
Even before these political moves, Peru's economy certainly helped, analysts say. "Investors are deaf to the political noise.