Business Notes FINANCE

Alan Garcia has never shied away from controversy. Two years ago, the Peruvian President stood up against international bankers and defiantly proclaimed that his country would limit payments on its $14.3 billion foreign debt to 10% of Peru's export earnings. Last week he dropped another economic bombshell. During a traditional Independence Day speech to the Congress, Garcia said that in order to halt the growing flight of capital from Peru -- an exodus depriving the country of much needed funds for investment -- he intends to nationalize all banks and insurance companies and shut down private currency- exchange houses. Furthermore, selling dollars in the streets would be made a criminal offense. Only foreign banks with branches in Peru, such as Citicorp and BankAmerica, would be exempt from the nationalization.

The source of Peru's financial crisis is its faltering economy. Peruvians, who have watched their savings being ravaged by a 100% annual inflation rate, have been rushing to exchange their own currency, the Inti, for U.S. dollars that can be invested abroad. Under Garcia's new edict, the nationalized financial institutions will monitor and control all dollar sales, with the aim of keeping what remains of Peru's capital at home.