Peru finance minister says flood damages merit wider fiscal gap

Peru's Finance Minister Alfredo Thorne attends the Thomson Reuters Economic and Financial Forum in Lima, Peru November 3, 2016. REUTERS/Guadalupe Pardo

ASUNCION (Reuters) - Reconstruction efforts in Peru after severe flooding that killed more than 100 people warrant a wider fiscal deficit target, though the country is not planning to access debt markets to finance the deficit, the finance minister said on Saturday.

Reconstruction efforts will cost about $3 billion (2.39 billion pounds) over three years and begin in the second half of 2017, Minister Alfredo Thorne said in Asuncion, the Paraguayan capital, where he was attending an Inter-American Development Bank governors' meeting.

The meetings were being held after protesters stormed and set fire to Paraguay's Congress late on Friday following a secret vote in the Senate for a constitutional amendment that would allow President Horacio Cartes to run for re-election.

Thorne did not specify for which fiscal year Peru's deficit target would be widened.

"We are going to present a project to Congress and within that we will propose an increase in the fiscal deficit that is consistent with our laws ... during a natural disaster we can temporarily increase the deficit," Thorne told journalists.

He said Peru's prime minister would present the bill in the coming days.

Peru is also seeking more international aid to help hundreds of thousands of people cope with ongoing floods and mudslides, which have torn apart much of the Andean country's infrastructure, the transportation minister said on Friday.

Peru is launching a major rebuilding effort just as public works are slowing due to a corruption investigation involving Brazilian builder Odebrecht [ODBES.UL].

Public prosecutors in Peru have not ruled out investigating the country's biggest builder, Grana y Montero, or individuals linked to the company, as part of an investigation into its scandal-plagued Brazilian partner, a source in the attorney general's office said this week.

But Thorne on Saturday said Grana y Montero would not be impeded from participating in the country's rebuilding efforts.

(Reporting by Luc Cohen, writing by Caroline Stauffer; editing by John Stonestreet, G Crosse)

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