Fitch LatAm Corporate FX Risk: USD Debt & Dollarized Banks Make Devaluation a Plus in Peru

CHICAGO--()--With 85 percent of Peruvian corporate debt denominated in a foreign currency and a highly dollarized banking system, Peru's foreign exchange (FX) risk would benefit from local currency devaluation, according to the latest report in Fitch's six report series 'LatAm Corporate FX Risk'.

Reports will be released daily through April 22 per the schedule found at the bottom of this release.

Median net leverage for Peruvian corporates is projected to be 2.9x for 2016, meaning a 10 percent currency devaluation would result in a 0.3x decline in net leverage to a median of 2.6x for 2016. A 20 percent devaluation would result in net leverage of 2.5x. Conversely, a 10 percent appreciation would increase median net leverage to 3.1x for 2016.

"Many Peruvian corporates are naturally hedged and would benefit from a weaker currency," said Phillip Wrenn, Associate Director. "Their revenues are generated in USD while their costs are in local currency."

Companies with domestic-based revenue and cash flow generation, such as Cementos Pacasmayo S.A.A. and Alicorp S.A.A. have implemented expensive but successful hedging strategies.

The LatAm Corporate FX Risk series will be released as follows:

April 15: Latin America Corporates FX Sensitivity Analysis;

April 18: Brazilian Corporate FX Risk - Prevalence of Natural Hedges and Derivatives;

April 19: Chilean Corporate FX Risk - Depreciation Impact Positively Skewed;

April 20: Colombian Corporate FX Risk - Losers Outweigh Winners;

April 21: Mexican Corporate FX Risk - Highly Exposed to Currency Weakness;

April 22: Peruvian Corporate FX Risk - Portfolio Positioned to Benefit from Currency Depreciation.

For more information, a special report titled 'Peruvian Corporates - Well Hedged Against FX Risk' is available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Peruvian Corporate FX Risk (Portfolio Positioned to Benefit from Currency Depreciation)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878323

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Contacts

Fitch Ratings
Phillip Wrenn
Associate Director
+1-312-368-2075
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Josseline Jenssen
Director
+51 999-108-046
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Phillip Wrenn
Associate Director
+1-312-368-2075
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Josseline Jenssen
Director
+51 999-108-046
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com