Uruguay joins investment-grade club with S&P upgrade

Uruguay joined the coveted club of Latin American investment-grade countries on Tuesday as Standard & Poor's upgraded its credit ratings, praising the government's "prudent" economic policies.

S&P said the upgrade, which took Uruguay's ratings to BBB-minus from BB-plus, was based on the country's sound economic growth prospects and improving fiscal and external indicators.

"Prudent economic policies in recent years, backed by a broad political consensus, have allowed Uruguay to grow rapidly and reduce its main credit vulnerabilities," S&P's analyst Sebastian Briozzo said in a report.

The outlook on Uruguay's new rating is stable, S&P said.

Squeezed between South American giants Brazil and Argentina, Uruguay is led by a former leftist guerrilla leader - President Jose Mujica - who has managed to promote investment by sticking to a fairly orthodox script.

S&P stripped Uruguay of its investment-grade status in 2002 during an economic crisis linked to an Argentine meltdown.

"The main risk for Uruguay from here forward is how it could manage a strong correction in Argentina, and with this (upgrade) we're saying ... it is prepared to administer a negative Argentine impact in an appropriate way," Briozzo said.

Uruguay's agriculture-based economy expanded a slightly lower-than-expected 5.7 percent in 2011, marking the ninth straight year of growth.