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Strong fundamentals

Article - November 29, 2013
Smart fiscal and economic policies are helping sustain Peru's growth
PERU
Although Peru is seeing a slight economic downturn due to a drop in global commodity prices, forecasters predict buoyancy owing to three main aspects. According to the Minister of Finance, Luis Miguel Castilla Rubio, these are Peru’s “very stable macroeconomic framework” with fiscal surpluses that allow the country “to pursue counter-cyclical policies”; a “market friendly framework for investment”; and lastly, an increasingly open economy.
 
Julio Velarde, President of the Central Bank, points to Peru’s low import duties as an example of the country’s openness, especially compared to the past. “Until 1990, duties were higher than 100%, and now on average they’re just 1.2%,” he says. “Now with such low duties, the industries that have survived are those that can compete in global markets.”
 
Mr. Velarde also highlights how Peru’s low and stable inflation rates – the lowest in Latin America during the first decade of the 2000s, averaging just 2.3% – have allowed the government to issue long-term bonds. “We’ve been one of the countries in the region, along with Mexico, to issue 30+ year bonds in the local currency,” he says. 
 
As for the country’s financial sector, Minister Castilla claims that Peru’s regulatory system is “ranked as one of the best in Latin America,” having already complied with the Basel III requirements. The constitutionally autonomous central bank has followed an “adequate monitoring policy” leading to a banking system that is well capitalized and liquid. 

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