By Marco Aquino and Walker Simon
LIMA (Reuters) - Peru will seek to raise as much as it can locally to finance up to $1.8 billion in payments to the Paris Club, its economy minister said on Friday.
"We are first going to go to the local market in soles (Peruvian currency) to raise the funds," Luis Carranza said, speaking at the Reuters Latin American Investment Summit. "We'll go out to the international markets for what we can't get here."
Pointing to the booming local capital markets, he said the soles share of Peru's total public debt had climbed from 8 percent in 2003 to 23 percent today.
The aim was to take it to 30 percent of the total debt by year-end, he added, declining to give an end-2007 forecast of overall Peruvian government debt.
Peru's total debt currently stands at about $30 billion, of which between $5.5 billion to $5.6 billion is owed to the Paris Club, he said.
Carranza expected Peru planned to make a proposal to the Paris Club in the second quarter of this year to prepay between $1.5 billion and $1.8 billion in debt which starts maturing in 2010.
Peru's obligations include debt owed to 19 foreign government creditors grouped in the Paris Club.
Carranza forecast an average annual economic growth rate of between 6 percent and 7 percent over the next five years.
By comparison, the average annual growth rate in the past five years was 5 percent -- the highest such multi-year rate since 1970, the government says. Last year alone, the economy grew by 8 percent, the fastest rate in 11 years.
GROWTH RISKS
But Carranza said there were risks to his five-year scenario.
"The principal risk for us is on the foreign side, because we have a small and open economy; one of the engines for growth comes basically from exports," he said.
Peru's economy has boomed as world prices for metals have soared in recent years. More than half of the country's exports are minerals.
"If we have a greater slowdown in the U.S. economy and world commodities demand slows down more sharply, with terms of trade falling above 5 percent, then we could have a problem with the budget," he said.
PARIS CLUB Continued...
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