Peru readies economic package of 12% of GDP in fight against coronaviris: minister

LIMA, Mar 29 (Reuters) – Peru is preparing a package equivalent to 26.4 billion dollars or 12% of national GDP to mitigate the effects of the coronavirus on the local economy, an unprecedented amount in the mining country, the minister of Economy, Maria Antonieta Alva.

The package has three phases of 30,000 million soles each: to contain the disease, to ensure the companies’ payment chain by granting credit guarantees, and to reactivate the productive apparatus, Alva said in an interview with the local channel América Television.

“We are preparing to at least invest at least 12 GDP points for this, it is an unprecedented measure,” he said.

The government extended the state of national emergency a few days ago and a night curfew for another two weeks until April 12; and with it a social immobilization that has practically paralyzed the economy of the world’s second largest copper producer.

Last week, Congress gave the government of President Martín Vizcarra broad powers for 60 days to pass laws against the coronavirus. The official perspective is to achieve economic growth of 2% in 2020.

Analysts have warned that the Peruvian economy could record its first drop this year after more than two decades of consecutive growth, due to coronaviruses.

“We have to understand that this crisis is affecting regardless of the size of the company, it is a general crisis,” said the minister.

Alva stated that the amount foreseen in the economic stimulus plan could increase. “If more is required, more will be done, the important thing for us is to protect employment,” he said. “We have the fiscal back to take bold action.”

The president of the Central Bank, Julio Velarde, previously told a cable television channel that the agency will inject 30,000 million soles to the banks with guarantees to lend to companies, mainly small ones.

Some 350,000 companies, most with fewer than 10 workers, will be included in this plan, and it wants companies to replace their working capital with three-year loans, he said.

“The idea is very simple, the central bank lends to banks for a relatively long period at a rate of 1.25% (annual) now, which should drop by 1% in the coming weeks,” said the head of the monetary body. in an interview with Canal N.

To do this, Velarde said that the bank is considering reducing the benchmark interest rate again “before the end of the three weeks”, after reducing it to 1.25% from 2.25%, to its lowest level by more of a decade, due to the crisis.

The head of the monetary body also mentioned that at the juncture there is also a risk of a sharp reduction in inflation, from a current 2% annualized to one “close to 1%”.

(Report by Marco Aquino)