Peru readies $26 billion stimulus plan to mitigate coronavirus impact

FILE PHOTO: Municipal workers clean the streets and the facades in the Chorrillos neighborhood as Peru's government considers extending the days of the state of emergency and curfew to stop the spread of the coronavirus disease (COVID-19), in Lima, Peru March 21, 2020. Picture taken March 21, 2020. REUTERS/Sebastian Castaneda

LIMA (Reuters) - Peru’s government is readying a massive economic stimulus package worth around 12% of gross domestic product to help mitigate the impact of a global coronavirus pandemic, the copper-rich country’s economy minister said late on Sunday.

The South American nation is planning to spend 90 billion soles ($26.41 billion) to support citizens and the key mining sector, Economy Minister Maria Antonieta Alva said in a televised interview late on Sunday.

The package will have three phases of 30 billion soles each; containing the disease, ensuring companies’ payment chains by granting credit guarantees, and reactivating production in the world’s second largest copper producer.

“We are preparing to invest at least 12 GDP points for this; it is an unprecedented measure,” Alva said in an interview with local channel América Televisión.

Peru has imposed tough rules including isolation measures and curfews to stem the spread of coronavirus, which has brought much of the country to a standstill and prompted analysts and economists to slash growth forecasts.

Alva said the amount for the economic stimulus plan could increase. “If more is required, more will be done, the important thing for us is to protect employment,” she said. “We have the fiscal strength to take bold action.”

Peru’s central bank head Julio Velarde also told local television that as part of the plan the body would inject 30 billion soles into banks for loans to mainly smaller companies to help cover their working capital.

“The idea is very simple, the central bank lends to banks for a relatively long period at a rate of 1.25% (annual) now, which should drop by 1% in the coming weeks,” Velarde said in an interview with Canal N, indicating a potential rate cut.

Peru’s benchmark rate was cut to 1.25% from 2.25% earlier in March, the lowest level in over a decade.

Reporting by Marco Aquino; Writing by Adam Jourdan; Editing by Chizu Nomiyama