PARIAH PERU REFUSES TO WORRY
A stock market boom is a strange reaction to being blackballed by the International Monetary Fund. But that's what happened in Peru. The Lima Stock Exchange index has more than doubled since the Peruvian President, Alan Garcia, decreed that he would use only 10% of his country's export revenues to pay its debts.
The International Monetary Fund, which likes to think of itself as a prime creditor, came off particularly badly. By the middle of August Peru owed it arrears of $182 million. The IMF demanded that the debt be cleared by August 15, but Peru made only a partial payment of $35 million. The IMF at once declared Peru ineligible for further borrowings.
That day the Lima Stock Exchange continued its rise. Total volume was less impressive, though: 269 trades worth slightly over $1.5 million.
The declaration of ineligibility didn't take Peruvian central bank officials and members of the government by surprise. "What had to happen happened,' said Hector Neyra, a veteran at the central bank who in 20 years has risen from the ranks to the number two job of president.
Luis Alva Castro, who is both Prime Minister and Minister of Finance and Economy, hinted to Euromoney, on the morning of the deadline, that he thought Peru would be declared ineligible.