Peru's fiscal policy.
On January 1, Peru's new tax legislation entered into effect. The move is part of the government's counter-cyclical fiscal and monetary strategy that aims to boost short-term growth and combat the slowdown in both domestic and foreign demand. The government's expectation is that tax cuts will have the effect of increasing corporate investment and consumer spending.
- Government attempts to stimulate investment are unlikely to have an impact on the decision-making processes of large foreign investors.
- Structural impediments may complicate raising the threshold of direct taxation -- an important criterion for eventual OECD membership.
- In spite of a growing fiscal deficit, Peru's credit rating will remain strong.