Peru plans bond sales to finance ballooning fiscal deficit, minister says

By Marco Aquino

LIMA (Reuters) - Peru, the world's no. 2 copper exporter, plans to issue up to three sovereign bonds this year to finance its ballooning fiscal deficit after economic growth edged above forecasts last year, Economy Minister José Arista told Reuters.

Peru is one of South America's most economically stable countries despite regular political upheaval, but a deficit that widened to 3.6% of gross domestic product (GDP) last year - its highest since 1992 excluding pandemic years - threatens its credit rating and could push up financing costs.

"We plan to do it in two or three interventions in the external market," Arista told Reuters in an interview late on Tuesday, adding that the government would wait for international political turbulence to calm first.

"Obviously, fiscal spending cannot be cut suddenly this year, it has to be a progressive cut," he said. The official projection is for a 2.2% deficit in 2025.

Arista said that Peru's economy, which has been bouncing back since a recession in 2023, was likely to have grown 3.3% last year, slightly above forecasts for 3.2%, with a 5% expansion in December. Official growth numbers for 2024 have not been published.

"Peru must, can and needs to grow much more," he said, giving a "conservative" projection for growth above 3% in 2025. "To solve all our social problems quickly and provide well-being to the population, we must grow at rates above 5%."

The minister, who met with mining firms including Glencore, Anglo American and Newmont in Davos last week, said the sector was buoyed by Peru's economic stability but had concerns about over-regulation.

He said that Newmont had committed to getting local community backing for its $2 billion Yanacocha Sulfuros copper-gold project in northern Peru.

"They have committed to building a dam for the city of Cajamarca. They are aware that they cannot go into mining without first solving the water problem," he said.

Newmont, which operates the largest gold mine in Peru, reported in mid-2023 that it had postponed for "at least two years" its decision on Yanacocha Sulfuros.

Arista said Peru needed to make use of its strong current growth momentum to boost investment in new mines, key to maintaining Peru's global position in the copper market with rising rivals such as the Democratic Republic of Congo.

"Peru has entered a cycle of sustained growth," Arista said. "We have to take advantage of this situation. We have to open more mines, more copper mines."

(Reporting by Marco Aquino; Editing by Adam Jourdan and Sharon Singleton)