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Dollar deposits rise in Peru as currency fears, political woes linger


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Dollar deposits rise in Peru as currency fears, political woes linger

Demand for bank deposits in dollars has been increasing in Peru amid increased political risks and greater uncertainty over the local currency, SEMANAeconómica reported.

From December 2018 to July 2019, 41% more new dollar accounts have been created in the banking system, raising the dollarization rate of bank deposits from 39.49% at the end of 2018 to 40.43% as of July 2019, banking industry association Asbanc said.

Increased demand is driven by exchange rate fears due to expectations of devaluation in the sol, Carlos Rojas, CEO of asset management firm Capia SAFI, told SEMANAeconómica. Uncertainty is also exacerbated by a political conflict between Peruvian President Martin Vizcarra and the opposition-led Congress, which was dissolved by the president in October.

The rising trend for dollar deposits is a reversal of the tendency that Peru had seen over previous years away from dollar deposits. Last year, the number of dollar deposits dropped by 2%, according to the report.

The increase in dollar deposits comes despite declining passive rates — the interest that banks pay for their customers' deposits — and is expected to continue until early 2020, when a new Congress will be sworn in, according to Rojas.