Monday, July 30, 2007

Peru's Pres Garcia Promises To Reduce Foreign Debt, Poverty


LIMA (Dow Jones)--Peruvian President Alan Garcia, in his annual state-of-the-nation address Saturday, reiterated many of the goals that his government hopes to attain, including lowering foreign debt levels and cutting poverty.

Garcia said the government's goal is to reduce poverty to some 30% by the end of his term in 2011, from the about 50% level in 2005. The Garcia administration had earlier spoken of reducing poverty to some 40% by the end of its mandate.

The president added that by the end of his term, Peru's foreign debt - as a percentage of GDP - would fall to 13% from some 24% now.

He also said that Peru would have $30 billion in international reserves, by 2011, compared with some $23 billion currently.

Those goals were stated against the backdrop of the strong performance by Peru's economy. The nation's gross domestic product expanded by 8.0% last year, and Garcia was optimistic that this level of growth could be reached this year.

"Last year we grew some 8.0%, and this year we will do it again," Garcia said, adding that growth, which in recent years has been in good part due to rising prices for mineral exports, was now more widely based.

In his speech, Garcia said that Peru has done its part in negotiating a free-trade pact with the U.S. and called on the U.S. Congress to approve the deal, already approved by the Peruvian legislature.

"Peru has done what it can do, now it is up to the U.S. Congress to complete with its part," he said.

In his speech, Garcia said that Peru was a nation with "profound problems and conflicts." Garcia added that a lack of resources and of management skills needed to solve problems had limited advances in the first year of his government.

But he said that the government would continue to increase public sector spending on investments, and to work towards a greater decentralization of government services and spending.

"The state has changed. It has decentralized spending. This is a quiet revolution," he said.

Political analysts have noted that while the economy remains robustly healthy, with low inflation, the nation's political structure remains fragmented. Many politicians, including those in Congress and local governments, held in low esteem by many Peruvians, the analysts.

Despite the strong economic growth, Garcia's popularity has declined to a 32% approval rating in mid-July from some 63% about a year ago, according to pollster Ipsos Apoyo Opinion y Mercado.

Pollsters say the decline is tied in part to the perception that the government hasn't done enough to solve the many social problems that continue to afflict the Andean nation.

Garcia, leader of the social democratic Apra party, took office for a five-year term, winning in a close run off vote against nationalist Ollanta Humala, who wanted to radically overhaul Peruvian society.

Garcia was previously president from 1985 to 1990, in a term that ended with Peru beset by economic and social problems.

Garcia's speech on Saturday was markedly different than those given in his first term.

Peruvian newspapers noted that in a state-of-the-nation speech 20 years ago, Garcia said the government would nationalize the nation's banks. That measure failed. Garcia has since then adopted more orthodox free-market economic policies.

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