IMF Says Peru in Good Position as Emerging Market Risks Rise

The International Monetary Fund said Wednesday that Peru is well-prepared to mitigate turbulence in the international economy this year, as uncertainty has increased in a number of emerging markets.

The IMF pointed to Peru’s strong international reserves, which totaled $65.9 billion as of January 23, equivalent to about 32 percent of its gross domestic product. The Central Reserve Bank of Peru’s reserves have almost doubled from $38.2 billion seven years ago, prior to the global financial crisis.

The IMF said the main risk facing Peru is the slowdown in growth from its main trading partners, such as China, and the impact of tapering by the U.S. Federal Reserve, state news agency Andina reported.

Some emerging markets that have failed to enact disciplined fiscal policies are now facing the prospect of major economic shocks. In Latin America, both Argentina and Venezuela have seen their currencies plummet in recent days.

Peru’s fiscal management has been highly praised during the past decade. Peru’s economy was impacted last year by a decline in metal prices as a result of lower demand from China.

However, the country has so far been weathering any impact by the Federal Reserve’s tapering. Finance Minister Luis Miguel Castilla said in late December that he didn’t expect the reduction of the Fed’s bond-buying program would impact Peru, as long as it was done in an orderly manner.

The biggest impact so far of the reduction of the multi-billion dollar bond purchases has been a weakening of Peru’s sol currency against the dollar. The sol weakened about 10 percent against the dollar in 2013.

The Central Bank has been selling dollars in order to stem the sol’s depreciation. On Wednesday, it sold $440 million, the largest amount so far this year.

Economists expect Peru’s economy to grow about 5.5 percent to 6 percent this year, after expanding about 5 percent in 2013.

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