Moody's: Liquidity risk of companies in Peru decreased

The rating agency Moody's notes that liquidity for Peruvian non-financial companies is still lagging behind its regional peers in Mexico, Chile, and Brazil, given its greater dependence on its ability to refinance short-term debt.

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Peru's non-financial corporate liquidity risk will remain high, but it has returned to 2016 levels after a period of destructive weather events, a major corruption scandal and political turmoil, says Moody's Investors Service in a new report.

"Peru's economic growth accelerated in 2018, particularly during the second half of the year," says Sandra Beltran, Assistant Vice President of Moody's. The recovery gave support to a greater generation of cash and improved access to capital markets. However, corporate liquidity risk in Peru is still behind the corresponding risk in other large markets in Latin America, with the exception of Argentina."

Liquidity for Peruvian non-financial companies is still lagging behind its regional counterparts in Mexico, Chile, and Brazil, given its greater reliance on its ability to refinance short-term debt with local banks. Despite having a strong and long-term relationship with local banks, non-financial companies in Peru may not have access to liquidity during economic crises.

Currently, the improvement in cash generation has helped some companies reduce their financing risk and boost their short-term debt coverage ratios, although for mining companies they expect mixed results in terms of cash generation until 2020.

In 2019, Moody's expects loan growth to reach almost 12%, backed by consumer, mortgage and corporate loans, the latter with a focus on the agriculture, mining and commerce sectors. Consumer loans will increase in line with rising consumer demand, higher bank penetration, and growth of the middle class, while relatively low-interest rates and falling real estate prices will boost mortgage lending.

The liquidity of the Peruvian banking system will continue to be adequate, despite the acceleration of loan growth.

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