Press Release No. 07/201

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Press Release No. 07/201

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Lima:

"It has been a great pleasure for me to be in Peru, my first visit during the administration of President Alan Garcia. During the past two days, I was privileged to meet with the President, Minister of Economy and Finance Luis Carranza, and Central Bank President Julio Velarde, as well as other senior officials. I also had very constructive meetings with representatives from the business community.

"Let me first reiterate my condolences for the tragic human loss and suffering caused by the earthquake in the Ica region and the coast of Peru. Our thoughts are with the victims and I had the opportunity to meet with some of them yesterday today when I visited the National Institute for Children's Health. I have been impressed by the response and efforts of President Garcia's government, and I am confident that with the support of the Peruvian society and the international community, Peru will succeed in promptly restoring the well being of all those who have been affected by this catastrophe.

"Turning now to my visit, I have been pleased to witness first hand the impressive progress that the Peruvian economy is experiencing. Economic growth in Peru has been among the strongest in Latin America—while inflation is well contained below official targets, the external position is solid, and vulnerabilities, particularly those related to dollarization, are declining. Clearly, this owes much to the government's firm adherence to prudent macroeconomic policies and an active agenda of structural reforms, which have laid the basis for sustained gains in employment and rising incomes. These favorable developments, along with President Garcia's determined focus on alleviating poverty, bode well for the future living standards in Peru.

"My discussions with President Garcia and his economic team focused on the main challenges that lie ahead for Peru. We agree that the current situation provides Peru with an excellent opportunity to consolidate macroeconomic stability and swiftly reduce poverty, as well as strengthen the resilience of the economy to shocks, deepen financial intermediation and domestic capital markets, and improve the business environment. To achieve these goals, continued efforts in addressing social and infrastructure needs are a high priority. This will be helped by fully implementing the government's comprehensive antipoverty strategy, by strengthening the public investment framework further, and most notably by establishing a comprehensive legal framework for public-private partnerships. It will also be important to sustain policies aimed at entrenching the reduction of dollarization observed in recent years, through active public debt management, and by promoting balanced participation of public institutions in the financial system. President Garcia and I also agree that efforts should continue to build consensus toward new labor market legislation that effectively reduces informality, which will complement the government's antipoverty efforts.

"I also discussed with the authorities the governance reforms underway at the IMF. These reforms provide a historic opportunity for the Fund to enhance the role and voice of many dynamic emerging market economies, including Peru. Other initiatives include developing a new instrument for financing balance of payments difficulties and a new income model for the IMF. We look forward to continue working closely with the Peruvian authorities to help bring these important reforms to fruition.

"This will probably be my last visit to Latin America as Managing Director of the Fund. It does not seem very long ago that I visited Peru as a candidate for this position, and received the generous support of Latin American governments. But in the time since then I have seen much progress and many positive developments in Latin America. I believe that historians will look back on the past decade as one in which Latin America addressed longstanding problems of instability and slow growth. So, I am concluding my visit highly satisfied and confident that it has helped solidify the longstanding and fruitful relations between Peru and the Fund. In our view, Peru remains an example to many countries, particularly in Latin America, of how strong commitment to prudent policies and steady reforms is an essential component of a successful strategy for economic stability and sustainable growth. We in the Fund look forward to continuing our policy dialogue with the Peruvian government and our support of its economic program."