Peru Closes Banks to Avoid Pullout of Dollar Deposits

Peru’s new government today ordered banks closed for two days as part of a tough new economic program that could include exchange controls.

The measure, announced by the Finance Ministry, appeared designed to prevent a run on the banks by nervous Peruvians who might try to withdraw dollar deposits.

President Alan Garcia, in his inauguration speech Sunday, pledged tough new measures to rescue the country from an economic crisis marked by widespread unemployment and an inflation rate of nearly 200%.

He announced he would prohibit transactions in dollars, which many Peruvians use instead of the national currency, the sol, because of the sol’s rapid devaluation.