LIMA, Sept 2 (Reuters) - Brazil’s sinking economy is a new risk to Peru’s fragile recovery and builds on worries about China’s slowdown and an exodus of capital ahead of an expected U.S. interest rate hike, Peru’s finance minister said Wednesday.
Brazil’s economy is slipping into a recession that is on track to be the country’s worst in nearly three decades.
“That has a direct impact on Peru because of economic links but also because of the uncertainty that it can generate in the region,” Finance Minister Alonso Segura said.
Peru lowered its growth forecasts for 2015 and 2016 on Monday and warned of further “negative shocks” to the mining-powered economy.
Officials in Peru are struggling to consolidate a recovery from the worst slowdown in four years. Growth picked up to a 3 percent year-on-year expansion in the second quarter.
Brazil’s economy is Latin America’s biggest and its sharp downturn is contributing to fears that emerging markets will cripple global growth.
The impact could be particularly acute in small neighbors such as Peru, where Brazilian construction and mining companies have invested billions in recent years.
A vast corruption inquiry into engineering firms that has paralyzed public works in Brazil has already affected Peru.
In response to Brazil’s investigation, Peru’s attorney general launched a probe into potential bribery on a transcontinental highway built by Brazilian companies.
One of the Brazilian builders on the project, Odebrecht SA , is investing at least $5 billion in a natural gas pipeline in Peru and billions more in highways, tunnels and canals. (Reporting By Mitra Taj; Editing by Ken Wills)