May 6, 2020 / 8:17 PM / a month ago

Peru Central Bank to offer short-term loans, buy dollars from pension funds

LIMA, May 6 (Reuters) - The Central Bank of Peru said on Wednesday it would offer short-term loans to the country´s private pension fund managers to help ease the pain of complying with a new law that allows citizens to partially withdraw their savings amid the coronavirus outbreak.

Julio Velarde, president of the bank, said the three-month loans would allow the fund managers to hang on to investments, preventing a fire sale of cheap assets at a time when they are already reeling from the impacts of the coronavirus spread.

Velarde said the bank would also buy dollars from the funds as necessary for a limited time.

“That will reduce the volatility of the exchange rate ... and limit the impact on the pension funds. Otherwise the dollar accounts would be liquidated for fewer soles,” Velarde said in a speech before a Congressional workgroup that was broadcast online.

Peru’s Congress late in April enacted a law allowing individual withdrawals of up to 25% of their holdings in private pension funds to mitigate the impact of the coronavirus pandemic.

Four private pension fund companies operate in Peru, managing an equivalent of $46 billion, according to data at the end of March. Peru adopted the system almost three decades ago, following the Chilean model.

The Andean nation has been particularly hard hit by the global coronavirus pandemic. The number of new cases confirmed on Tuesday soared above 50,000 its despite being one of the region´s first to implement a shutdown when coronavirus landed.

Peru ranks behind only Brazil for contagions in the region.

Reporting by Marco Aquino; Writing by Dave Sherwood; Editing by Leslie Adler

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