(Adds finance minister’s comments on U.S. interest rate hikes, bond operations)
By Marco Aquino
LIMA, March 20 (Reuters) - Another annual drop in private investment in Peru this year could drag down economic growth in the global minerals exporter to below 4 percent, Finance Minister Alonso Segura said on Friday.
The government of President Ollanta Humala is ramping up spending to encourage a 2015 economic expansion that will top 4 percent, Segura said.
“We’re going to be above 4 percent with private investment flat and below 4 percent with negative private investment,” Segura said at a business event.
In 2014, private investment slipped 1.6 percent and public investment 3.6 percent, according to the central bank, which cited a slowdown in mining projects and local government contracts. Last year’s drop in private investment was the first since 2009.
Segura said private investment will likely rise 1.5 percent this year. “A slight recovery, almost none, but a recovery,” he said.
The government expects growth up 4.2 percent in 2015, Segura said, echoing a forecast made by another official in his ministry this month.
“The 4.2 percent forecast has a slight downward bias,” Segura said.
Growth this year has yet to show signs of a strong recovery from a sharp slowdown over the past year, in part because of a steep drop in investments by local governments that are in transition after elections last year.
Segura called the stalled public works in the provinces “a disaster” and said the government was helping new officials boost spending.
Segura said Peru was well prepared for expected interest rate hikes in the United States this year, which analysts say could lead to an outflow of capital and further stoke the sol currency’s 4-percent slide against the dollar this year.
“We have international reserves like no one else in the region, we have fiscal cushions, we have a financial system that is more than adequately capitalized,” Segura said.
Peru issued some $2 billion in sovereign and global bonds this week ahead of the expected rise in U.S. borrowing costs, Segura said.
The bond deals, Peru’s second tapping of global capital since October, mainly aimed to extend maturities and expand debt held in soles.
Peru, rated A3/BBB+/BBB+, issued $1.3 billion worth in new bond supply, IFR reported.
The new debt will help finance an expected 2016 fiscal deficit equal to 2 percent of gross domestic product, the same shortfall forecast for this year, Segura said. (Reporting by Marco Aquino; Writing by Mitra Taj; Editing by David Gregorio and Grant McCool)