Peruvian Investors Weigh Dollar Purchases Against Debt Reduction as Currency Fluctuates
Lima, Peru - As the Peruvian Sol experiences volatility, investors are grappling with a key financial decision: whether to convert savings into dollars or prioritize paying down debt. Financial expert Gallesio recommends a tiered approach, starting with a 70/30 split favoring Soles for new investors, and emphasizing debt reduction alongside emergency fund building in the current economic climate.
The fluctuating exchange rate and high personal credit costs in Peru create a complex landscape for personal finance. This impacts a broad range of Peruvians, from those just beginning to invest to individuals carrying meaningful debt burdens.The core question is whether to capitalize on a possibly favorable exchange rate by acquiring dollars, or to focus on mitigating the financial strain of expensive loans.
Gallesio proposes a simple initial formula: 70% of savings in Soles and 30% in dollars. As savings increase, diversification into instruments like term deposits, mutual funds, and CTS (a Peruvian employee savings account) should be considered.
However, the immediate priority depends on debt levels. If debt carries an interest rate exceeding 15% annually, it should be addressed first. Conversely,if debt is low and there’s no emergency fund,saving should take precedence.
“First reduces expensive debt and ensures a minimum emergency fund,” Gallesio advises. “Than, diversify in soles and dollars to protect you from future risks.”
Specifically, the advice breaks down to:
* convert all savings to a single coin.
* increase consumption because the dollar is low.
* Pay down debt if it’s vrey expensive (over 15% per year).
* Save first if debt is low and there’s no emergency fund.
Readers seeking further analysis can find related coverage on the current dollar pressures in Peru: The dollar under pressure: Where does it go short and medium term?
This article was written by Carlos Rosales Salas, who has nine years of experience covering politics, economy, defense, and related topics in Peruvian media.