VZCZCXYZ0002
RR RUEHWEB

DE RUEHPE #0730 1192017
ZNR UUUUU ZZH
R 282017Z APR 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8505
INFO RUEHBO/AMEMBASSY BOGOTA 5677
RUEHQT/AMEMBASSY QUITO 1868
RUEHLP/AMEMBASSY LA PAZ APR SANTIAGO 1850
RUEHBR/AMEMBASSY BRASILIA 7834
RUEHBU/AMEMBASSY BUENOS AIRES 3346
RUEHCV/AMEMBASSY CARACAS 1131
RUEHME/AMEMBASSY MEXICO 3646
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LIMA 000730 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/AND, EB/IEP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
TREASURY FOR MMALLOY 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PE
 
SUBJECT: DOLLARIZATION DROPS BELOW 50%, VEHICLE CREDITS KEEP 
SOARING 
 
¶1.  Summary: Dollarization in Peru, as measured by bank deposits, 
decreased to below 50% in March 2008, when deposits in domestic 
currency exceeded those in dollars for the first time since the 
economic reforms of the 1990s, according to a report of the Banks 
Association (ASBANC).  ASBANC also reported that vehicle loans 
stayed in the fast lane, increasing 50.6% year-on-year in March, 
while delinquency on these loans was surprisingly low at 0.45%, both 
a clear reflection of the growing incomes that result from the 
impressive growth of the Peruvian economy since 2002, and keen 
credit competition.  End Summary. 
 
NEW SOL DEPOSITS EXCEED DOLLARS FOR THE FIRST TIME 
--------------------------------------------- ----- 
¶2.  For the first time since ASBANC started collecting banking 
statistics in 2001, deposits in New Soles exceeded dollar deposits, 
accounting for 51.6% of total deposits.  Dollarization of deposits 
thus stands at 48.4% at the end of March 2008, compared with 72.6% 
at the end of January 2001.  Peru's Central Bank (BCR) noted that 
dollarization of broad money (liquidity) dropped to 39.8% at the end 
of March 2008, compared with 50.2% at the end of March 2007. 
 
¶3.  Dollar deposits had been decreasing steadily in the last few 
years, but the pace accelerated in the January-March period, when 
the dollar rate against the new sol fell 5.7% compared with the 
December 2007 average rate.  At the end of December 2007, dollar 
deposits accounted for 59.4%, falling a hefty eleven percentage 
points to 48.4% at the end of March 2008.  Still, dollar deposits at 
the end of March 2008, $14.1 billion, were 17.7% higher than a year 
earlier. 
 
AUTOMOTIVE CREDITS IN THE FAST LANE 
----------------------------------- 
¶4.  While the Central Bank is trying to tighten credit as a result 
of inflationary fears, vehicle bank loans stayed strong, increasing 
50.6% in March 2008 compared to the same month of 2007.  Delinquency 
on these vehicle loans was extremely low at 0.45%.  Both figures are 
a clear reflection of the growing incomes that result from towering 
growth of the Peruvian economy since 2002, and vibrant banking 
competition.  These loans reached $249 million at the end of March 
2008, still a relatively small part of total bank consumer loans at 
5.0%.  Market share of vehicle bank loans is slated to keep 
increasing, even though total bank loans also increased a hefty 
28.02% in the same period. 
MCKINLEY