Tuesday, October 3, 2023

Colombia Studying Measures to Stem Peso Rally, Cardenas Says

Colombia is worried about the strong peso and is evaluating further measures to ease the local currency’s rally, Finance Minister Mauricio Cardenas said.

“We will be studying formulas, options in the next few weeks to address this situation,” Cardenas told reporters in Bogota after meeting with President Juan Manuel Santos today. “The government is aware that this is a problem. It’s a reflection of the economy’s strength.”

The Treasury will boost dollar purchases this month using excess cash and it will also buy the greenback for the nation’s petroleum stability fund, Cardenas said. Policy makers will discuss ways to stem the rally when the central bank next meets on Jan. 28, said Cardenas, who is also president of the bank’s board.

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Cardenas’ comments come after Agriculture MinisterJuan Camilo Restrepo urged Banco de la Republica last week to increase dollar purchases to slow the currency’s appreciation, which is making the nation’s coffee, flower and banana exporters less competitive. Central bank Governor Jose Dario Uribe said Jan. 2 that the peso’s strength is a concern and reiterated that the bank will buy a minimum of $20 million a day through at least the first quarter to curb its advance. Last year, the bank printed pesos to buy a record $4.8 billion.

The government will buy around $1 billion this year for its petroleum stability fund, Cardenas said today.

A tax cut on overseas investors’ bond profits is also leading to increased appetite for Colombia, Cardenas said. Colombia reduced the levy on domestic securities to 14 percent from 33 percent as of Jan. 1 to help increase demand for local bonds and lower the nation’s borrowing costs.

The peso appreciated 0.3 percent to 1,759 per U.S. dollar today. It touched 1,750.50 on Jan. 2, the strongest intraday level since July 2011, and has gained 2.1 percent in the last month.

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