In a major escalation of Peru's financial feud with the international banking system, President Alan Garcia announced today that the government would continue for another year to limit Peru's payments on its foreign debts to 10 percent of its export earnings.
Garcia also announced that the government will limit foreign debt payments by private Peruvian companies and also will prohibit foreign investors from taking their profits out of Peru for the next two years.
"We will dialogue with our creditors," Garcia said, "but we will propose conditions of interest rates, terms and grace periods which are compatible with the 10 percent cap."
The government paid only $320 million in the past 12 months against $4.8 billion in past and current debts. Another $1 billion was taken out of the country to pay private debts and profits of foreign investors.
"All companies, whether national or foreign, should share the conditions in which the country lives," Garcia said.
Speaking before a joint session of congress, Garcia reviewed his government's performance during his first year in office. He said the country would have to create an economy of "national resistance against imperialism" that would be able withstand financial reprisals and shortages of international reserves.