May 19 (Bloomberg) -- Moody's Investors Service may raise Peru's foreign-currency debt rating as early as the second half of this year as surging growth enables the Andean country to trim foreign debt, said Moody's sovereign debt analyst Mauro Leos.

Peru is growing at the fastest pace in the region as record commodities prices spur investment and consumer spending, Leos said in an interview with Bloomberg Television from New York. The economy expanded 9.3 percent in the first quarter after growing 9 percent last year.

``The Peruvian economy has shown dynamic economic growth,'' Leos said. ``Improvements in policy continuity, commodity dependence and dollar-denominated debt levels could lead to a rating upgrade.''

President Alan Garcia has taken advantage of a jump in revenue from metals and fishmeal exports and the strongest exchange rate in a decade to buy back debt and invest in infrastructure. Peru plans to pay down about $1.1 billion of debt ahead of schedule to the World Bank and Inter-American Development Bank in July after buying back almost $1.4 billion in debt earlier this year.

Moody rates Peru Ba2, two levels below investment grade and the same level as Colombia and Guatemala. Standard & Poor's rates Peru BB+, one level below investment grade, while Fitch awarded Peru an investment-grade rating of BBB- last month.

``There's an improvement in foreign debt ratios,'' Leos said. ``It's taking time because Peru started from a relatively high level of 70 percent in dollars, but there has been favorable government action toward debt reduction.''

The yield on Peru's 9 7/8 bond due in 2015 rose 6 basis points, or 0.06 percentage point, today to 4.882, according to JPMorgan Chase & Co. The bond's price, which moves inversely to its yield, fell 0.05 cent to 128.25.

The currency fell 0.6 percent to 2.7787 soles to the dollar, paring its advance this year to 7.8 percent.

To contact the reporters on this story: Alex Emery in Lima at aemery1@bloomberg.net; Karla Palomo in New York at kpalomo@bloomberg.net

Last Updated: May 19, 2008 17:16 EDT