Peru Imposes New Limits on Repaying Foreign Debt

President Alan Garcia on Monday hardened Peru’s stance on its foreign debt, limiting repayment of private-sector foreign debt and extending for a year a strict ceiling on public-sector debt repayment.

In a speech marking his first anniversary in office, he said that Peru will also restrict payments abroad of profits and license fees to protect foreign reserves and to build what he called an economy of resistance against imperialism.

He said Peru will prolong for one year its limit of 10% of export earnings for repayment of public sector foreign debt, adding that it would set new interest rates and repayment periods to foreign creditors.

“I announce to our creditors our decision to deal with governments and banks, but our definitive criteria is that Peru will not accept the current interest rates and time periods,” he said.

He added that he will open a dialogue to propose new conditions on interest rates and time periods.

Peru has a total foreign debt of about $14 billion, the sixth biggest in Latin America. The public-sector debt portion was $12 billion, he said.

Peru only paid $320 million out of the $2.2 billion that it owed over the past year on its medium- and long-term public-sector debt, Garcia said.

He said that to protect Peru’s net foreign reserves, he would limit for two years the repayment of foreign firms’ remittances abroad on their profits, debt and depreciation costs. He gave no more details of the restrictions.

Some $1 billion had left the country over the past year in private-sector debt repayments and foreign firms’ profit remittances, he said.

Peru’s private sector owes a total of about $1.35 billion in medium- and long-term foreign debt and several hundred million dollars in short-term foreign debt, central bank officials said.