Foreign Banking in Peru

September 25, 2007

LIMA, Peru. Dec. 1-The ultranationalist forces unleashed by the military coup d'etat here on Oct. 3, are now eyeing the foreign banking community in Peru.

Encouraged by the military junta's take-over of the nation's largest-and foreign owned-International Petroleum Company Ltd., on Oct. 9, both the extreme rightist and leftist forces have begun a campaign seeking similar action against foreign banks.

Thus far, the regime of Juan Velasco Alvarado has omitted any mention of foreign banks in his daily attacks on the ousted government of President Fernando Belaunde Terry for "selling out Peru's patrimony to foreign rascals and institutionalizing corruption, inefficiency, red tape and stupidity."

However, foreign bankers are not minimizing the sharpe attacks against them by newspapers controlled by the nadful of wealthy Peruvian backers of the military, who also control most of the important domestic banks. Nor do the foreign bankers dismiss the radio and television attacks by leftists.

"The military has pacified the let by taking over I.P.C. owned by a Canadian subidiary of the New Jersey Standard Oil Company," one foreign banker said yesterday. "And they are beholden to local banks who would like to see us out of the picture," he added.

The foreign business community, which includes important mining companies, is also dismayed at the apparent inability of the United States to guarentee them any protection from exploration.

Yesterday, the junta told United States Ambassador John Wesley Jones that his note on the take-over of I.P.C was "strange," because the concern is registered here as a Canadian Corportation.

Even the pro-United States newspaper, La Prensa, said editorially this morning "all foreign and domestic concerns in Peru have equal rights under the law and I.P.C has ample recourse in our courts for airing of their dispute within the Government."

Presently, the junta has a number of warrants out against officials of the Jersey Standard concern, charging evasion of taxes for over 40 years, fraud in declaring production figures and similar crimes. Most top I.P.C. officials are reportedly out of the country.

The conclusion of an agreement between President Belaunde ending a long simmering dispute, hastened the downfall of the elected Government.

Military men here also said yesterday that the disintegration of Peru's economy and "the refusal of the corrupt political groups in Congress to remedy the situation" prompted their action.

The charges and explanation for the military coup were contained in a "white book" issued yesterday by the national junta.

As the junta views the situation of foreign concerns, the steady take-over of domestic commercial banks by foreigners has reduced the amound of credit available to to Peruvian businessmen becuase the overseas bankers are said to favor foreign companies operating here.

Foriegn bankers counter that most Peruvian businessmen transfer their funds out of the country and depend on foreign and domestic banks to finance their operations.

Moreover, they note that their four largest concerns here, W.R. Grace and Co., South Peru Copper Company, Cerro Corportation and I.P.C., are also the biggest taxpayers in Peru.

The foriegn bankers note that their financing of overseas concerns thus produces most of the country's needed revenues. Although the military is filling the jails here with tax dodgers, few of the traditionally small elite that rules Peru and evades taxes have been imprisoned of charged with failure to pay taxes since the coup.

In any event, foreign businessmen believe that the reformist regime can count on continued support of the rightist and leftist elements by attacking them with impunity.

The banks are particulary vulnerable because of Perus's favorable external balance of payments ($277-million in the first nine months of the year) and the fact that they are heavily committed here.

The largest bank in Peru is Banco Credito, in which Italian banking and industrial interests have a major stake. The third largest, Banco Internacional, is controlled by chemical Bank New York Trust Company, the huge commodities trading house of Bunge, Borne & Co., and W.R. Grace & Co. The last two concerns are deeply involved in Peruvian business affairs.

Chase Manhattan Bank has a large investment in Banco Continental, the fourth largest bank here, and is also an important lender to the Peruvian Government.

The Banca de Lima is affiliated with Credit Lyonaise of France and French intersts in Peru, and is the eigth biggest. The Israel Discount Bank has an interest in the seventh largest Peruvian bank, Banco del Progresso.

The less important foreign banks in size but with traditional ties to overseas interests in Peru are the First National City Bank, New York; the Royal Bank of Canada, the Bank of London and South America, the Bank of Tokyo and the Bank of America, San Francisco.

Reprinted from the New York Times, December 2, 1968.

Tags: Chile, Eduardo Frei, foreign aid, political division

Like this article? Support our work. Donate now.