Peru was recently at the mercy of "Coastal El Niño" phenomenon characterized by heavy rains, landslides and floods that have destroyed infrastructure and crops, as well as left many citizens homeless.
"If those measures seek to improve the legal and institutional framework, as well as the business environment, then they will tend to attract much more capital flow from foreign investors in the long run, which would have implications for GDP […]," IMF's Western Hemisphere Department economist Carlos Caceres affirmed.
"Overall, Latin American institutional frameworks usually favor long-term capital flows," he told Andina news agency.
Said frameworks have indeed a strong implication for capital inflow in the long term, Caceres observed.
Resilient financial system
On the other hand, the IMF official highlighted the Peruvian financial system's high liquidity, which makes it more resilient to external shocks.
"If Peru —or any other country— manages to deepen its securities market with more liquidity, it will benefit from greater resilience to capital flows or foreign shocks," he pointed out.
Finally, he referred to the increasing flow of capitals to Latin America, driven by global variables and China's demand for assets.
In this respect, he noted that while said flows experienced a slowdown, rebounding global demand and commodity prices are expected to help them —including capital flows to Peru— fully recover.
Remarks were made during the 2017 Quo Vadis International Forum, which convened experts and Peruvian government officials to discuss and present proposals to boost local economy.
Organized by Lima Chamber of Commerce (CCL), the event featured Economy-Finance Minister Alfredo Thorne, as well as analysts from IMF, IDB, CAF, Peru's Central Reserve Bank (BCR), among other institutions.