Peru: A Benign Macro Backdrop

Peru is entering a benign macro environment: low and falling inflation amid a solid economic recovery. The country’s balance of payments position is robust, which will help the PEN depreciate by less than other EM currencies. The political situation is on shaky ground, but a regime shift will have to wait until 2026. We remain overweight on Peruvian equities, domestic bonds, and sovereign credit relative to the EM benchmarks.