* Country a magnet for foreign capital inflows
* Sol currency trading at 16-year high vs dollar
LIMA Dec 22 Peru will launch an aggressive plan
to prepay up to $1.5 billion in debt in 2013 to try to stem the
Peruvian sol's appreciation by soaking up foreign currency in
the local market, Finance Minister Luis Miguel Castilla said on
"We are going to use and make prepayments of between $1
billion and $1.5 billion in 2013, and this will serve to absorb
some of the appreciating pressure that exists in the economy,"
the minister told a news conference.
Peru's sol closed on Friday at its strongest level
in more than 16 years, with a bid price of 2.558 per dollar.
Yield-hungry investors have poured money into emerging
markets such as Peru, which has expanded on average by 6 percent
a year in the last decade. It currently ranks as South America's
Castilla also raised his forecast for 2013 economic growth
to 6.3 percent from 6.0 percent previously. The new number
matches the government's growth forecast for 2012.
The minister mentioned the possibility of debt prepayment
during an interview with Reuters nearly two months ago. He said
the debt prepayment was part of a "liability management policy"
that seeks to improve and extend the Andean country's debt
Paying foreign bonds early would complement other measures
the government has applied to curb the sol's rally, such as
raising deposit requirements on bank accounts denominated in
dollars or allowing local pension funds to invest more money
Peru has local and foreign debt in dollars and soles that
are equivalent to about $36.6 billion, or nearly 20 percent of
gross domestic product. About $20 billion is foreign debt,
according to the central bank.