Court Suspends Seizure of Banks in Peru
LIMA, Peru (AP) _ A civil court has suspended President Alan Garcia’s plan to seize control of private banks and finance companies while Congress acts on a bill to nationalize them.
Judge Eduardo Ruffo Otero said all bank assets, their properties and their operation must be restored to the owners today.
Finance Minister Gustavo Saberbein said government lawyers would consider what action to take on the civil court decision issued late Friday night. The government was expected to seek an appeal.
Garcia proposed last Tuesday that Congress approve a law to nationalize 10 banks, six finance companies and 17 insurance firms, in an effort to halt capital flight and channel capital toward domestic investment.
The president decreed that the government seize the companies, which are all Peruvian owned, and place them under the control of the Superintendency of Banks and Insurance until the Congress acted on the proposal.
The Congress is dominated by Garcia’s center-left Aprista Party and is expected to pass the nationalization measure.
The owners of the companies, led by Guillermo Wiese, a leading banker and industrialist, charged in a court complaint that the seizure violated the constitutional right to private property.
Ruffo Otero, of the 20th Civil Court of Lima, ruled in favor of the bank owners and ordered that the government takeover be suspended until the Congress votes on the nationalization bill.
The Congress is due to begin debate on the measure Tuesday. In addition to having the support of the Aprista Party, the measure is backed by the nation’s second strongest group in Congress, the United Left, a coalition of lefist and Marxist political parties.
Garcia on Friday defended his nationalization plan.
″This is my protection, this is my weapon,″ he said, holdng up a copy of the Peruvian constitution at a news conference.
He charged that the financial credit vitally needed in the nation’s economic recovery plan was being restricted by the private banks, which he termed a monopoly. He also said he must stem capital flight.
Bank owners have condemned the seizure and nationalization proposal as unconstitutional. They also said the action will discourage private investment and cut off Peru’s access to international credit.
Most world lending institutions have cut off loans to Peru since Garcia declared on taking office two years ago that he was restricting payments on Peru’s foreign debt to 10 percent of export earnings.
Peru owes $14.5 billion dollars to foreign lenders.
Garcia fueled his consumption-based economic recovery program with the dollars owed to the foreign banks. But the nation’s dollar reserves, now at $795 million, are expected to be depleted by early next year.
The economy grew at the remarkable pace of nearly 9 percent last year, and the government is predicting 7 percent growth this year. But independent economists have warned that declining investment coupled with heavy deficit spending and rising inflation will curtail growth by the end of the year.
The administration is counting on investment to begin fueling the economy when the dollar reserves run out, but has admitted investment so far has not reached its target.