Castilla Says Peru Can Expand $4 Billion Purchase PlanJohn Quigley
Peru’s government is ready to expand a plan to purchase $4 billion of U.S. currency to support the central bank’s effort to slow appreciation of the sol, Finance Minister Miguel Castilla said.
The Finance Ministry will buy at least $1 billion to service foreign debt as part of the plan to offset increased dollar inflows, Castilla told reporters in Lima. It will also prepay $1.8 billion in multilateral debt and add $1.2 billion to contingency reserves.
Peru’s foreign-currency inflows have risen amid increased demand as investors from developed economies seek higher-yielding assets in emerging markets, and as Peruvian companies seek financing abroad. The central bank has boosted dollar purchases this year and raised reserve requirements to curb dollar supply. The Finance Ministry will coordinate its purchases with the central bank, which has limits to how many dollars it can buy in the currency market without stirring inflation, Castilla said.
While the sol remains near its fundamental value versus the dollar, the government seeks to avoid an “accelerated” appreciation, Castilla said. The strength of the sol is a “challenge” for the export sector, he said.
The sol weakened 0.1 percent to 2.5765 per U.S. dollar at today’s close, according to Bloomberg prices.